CBLOmnibusv 7

A STRATEGY BY TYMEN
Trading Without Indicators

CBL “Naked” Trading Method
Revision Current as of:
9/2/2010
This document contains Tymen1’s thread discussion concerning Trading without Indicators. Content taken from “The finest in
trend trading” located at http://forums.babypips.com/newbie-island/32400-finest-trend-trading.html
Contents
TRADING WITHOUT INDICATORS
PART 1 – INTRODUCTION ............................................................................................................................................................4
How do we draw these [support and resistance (S/L)] lines? ...........................................................................................................4
Drawing of price action ................................................................................................................................................................6
PART 2 - THE COUNT BACK LINE ..............................................................................................................................................8
LONG ENTRY RULE .....................................................................................................................................................................8
Important CBL Points...................................................................................................................................................................9
SHORT ENTRY RULE .................................................................................................................................................................11
Outline so far of the naked trading method ....................................................................................................................................13
Part 3 - IMPROVING THE RISK/REWARD RATIO.................................................................................................................17
Exercises .....................................................................................................................................................................................19
New and radical method of determining exits. ...............................................................................................................................23
CBL Trade Rules Foundation .........................................................................................................................................................25
EXERCISE .................................................................................................................................................................................26
Exercise Answer .........................................................................................................................................................................27
PART 4 - THE D.N.A. OF THE BOLLINGER BANDS ..............................................................................................................28
Live Examples ............................................................................................................................................................................32
EXERCISE .................................................................................................................................................................................33
Exercise Answer .........................................................................................................................................................................34
Modified CBL ................................................................................................................................................................................35
Special cases ...............................................................................................................................................................................35
EXERCISE .................................................................................................................................................................................41
Exercise Answer .........................................................................................................................................................................42
ANSWER TO EXERCISE .........................................................................................................................................................44
CBL Rules ......................................................................................................................................................................................45
The Count Back Line rules...... .......................................................................................................................................................46
CBL Method In Detail ....................................................................................................................................................................48
THE ENTRY RULES ....................................................................................................................................................................51
FINAL NOTE .............................................................................................................................................................................51
Trade Types ....................................................................................................................................................................................56
Bubble Trades You Should/Should Not Take ............................................................................................................................56
BB Sausage Trades You Should/Should Not Take ....................................................................................................................57
Some pointers .............................................................................................................................................................................59
Bollinger Band DNA Chat Room ....................................................................................................................................................67
Tymen’s Return ................................................................................................................................................................................68
Trading Without Indicators Page | 2
Multi Contract Entry Trading ........................................................................................................................................................77
BBDNA WhiteBoard..................................................................................................................................................................78
CBL Back Test Results...............................................................................................................................................................89
Trend Trading Review ................................................................................................................................................................90
IMPROVING THE WIN/LOSS RATIO OF THE BOLLINGER DNA METHOD. .................................................................91
THE MACRO METHOD ................................................................................................................................................................92
Parabolic Sar Exit ...........................................................................................................................................................................98
Part 5 EXCELLENT EXITS ON BOLLINGER BAND WALKS ..............................................................................................99
MANDATORY READING .....................................................................................................................................................100
Exits ..............................................................................................................................................................................................108
EXIT RULES : .............................................................................................................................................................................109
BB Breakout Entry Rules .............................................................................................................................................................111
Example Entry BB Breakout ....................................................................................................................................................112
Slopmeter Code ........................................................................................................................................................................116
USING THE SLOPEMETER ..................................................................................................................................................119
Pointers on Trading CBL ..........................................................................................................................................................122
Exitmeter ......................................................................................................................................................................................122
BB Profit Walk Indicator Requirements...................................................................................................................................126
Sage Advice ..............................................................................................................................................................................130
Introduction-
This document contains the teachings of Tymen and his CBL Trading Method. All content contained within this document
comes from the thread specified on the front page. All content was formatted to fit these pages.
Certain user questions and answers are included along with Tymen’s posts. These questions are clearly indicated by the
prefixed TA- followed by the question. Tymen’s answer is prefixed by TA-. Relevant user discussions, attachments, and
remarks are also presented. These items are displayed in a separately outlined box and clearly marked as User Input.
This document is current as of the date specified on the front cover. To join the current discussions please visit the url:
http://forums.babypips.com/newbie-island/32400-finest-trend-trading.html.

TRADING WITHOUT INDICATORS
PART 1 – INTRODUCTION
Here we will look at blank charts and see how to set up support and resistance lines. (SR lines). These lines touch turning points
in the price action and therefore point to the
possibility of future price action turning at
these points also. We, therefore extend these
lines into the future.
My first example will be a simple daily chart

of AUD/JPY with 2 SR lines. Note - no
indicators!!
How do we draw these [support and

resistance (S/L)] lines?
1) De-magnify your chart so that a great
many candles are visible.
2) Click on the draw horizontal line
facility in your charting program (GFT is especially good in this respect).
3) Place a line anywhere on the chart. (It should go right across the chart).
4) Now scroll your line up and down so as to touch as many points as possible.
….This is a very subjective exercise!!
It is best if the price action just touches your line but

• you can cut through the wicks
• try not to clip too much off the bodies.
• in the chart above I have drawn 2 SR lines and the points of touch/cut are numbered.
DAILY chart of the Cable
I have improved the layout!!

Each line has a reference color
and reference numbers. This is
to prevent confusion. The
numbers for each line show
where the price action touches.
In order to try to get as many
touches as possible, I have
sometimes cut a little thro the wicks. I have tried to avoid chopping thro the candle bodies.

4 hour chart of EUR/USD
The same code again - numbers

color referenced to stop
confusion. We again place a
line on the chart, scroll it, and
try to get as many touches and
close touches as we can. At
least 3 are required in every
line!!
We need to cut thro the wicks at

times but try hard not to chop
thro the candle bodies. We then
get a balance at what we think is the best line. Our best line is somewhat subjective but this is not critical.
1 hour chart of USD/JPY
Here I have really knocked

down the magnification so that
the candles all appear black. I
can then get as many touch
points as possible. Again the
same rules for drawing the lines
apply.
20 minute chart of the Swissy
4 SR lines appear here - colour

coded. By scrolling your line
up and down, you try to get as
many touch points as possible.
How many lines to we draw
and which ones are
important?
Well, we will be using only 2 of

the SR lines –
• the one from which the
price action just came,
• and the one to which the
price action is just going to.

This chart is a copy of the chart
in the previous post. Only here
we have 2 of the SR lines - the
others were removed. On the
right hand edge, you can see the
latest price action - it is in
between the 2 SR lines.
Let us magnify this chart

greatly.
The price action came from the

grey SR line and is going to the
pink SR line. We can expect
something to happen when the
price action actually reaches the
pink SR line. It may pause, go
straight thro, or reverse and go
up again. At this stage we have
no idea. It is not important to us
what the price action will do at
this point.
It is just a marker for us at this

stage. What we note is that the
price action is going down, that
is, going short. What we are
going to do, is to find a very
powerful entry method for trading long when the time comes.
Drawing of price action

The blue line shows price action on a chart. The pink line is an SR line.
Now at first the price action is going down and we expect something to
happen at the SR line. In the past, price action has been bouncing off this line
so that is what we expect to happen this time. It does!! So we enter long at
point E.
Now the big boys do not like us tagging along for the ride. After all, they are
in the business of making money - which means they have to take our money
from us!! So what do they do?
Imagine holding a towel at one end and having a dog grab the other end in its
mouth. If you want the dog to let go of the towel, you will have to shake the towel, even give it a big flick. If the dog does not let
go, you will really have to shake the towel up and down with a strong snap to it. Eventually the dog may let go.
Now the towel represents the price action. You are the big boy banker. The dog is the small retail trader such as us.

You can see what the banker does - he snaps the price action back and forth to
make you let go. He accomplishes this by shaking the price action back and
forth, thus causing you to hit your stops!! If he can get you off his price
trend, then he has your money!! He will then run with it.
At point E, you enter long. The banker tricks you and causes a retrace at R -
you were not expecting that - you were expecting the price to go the green
line shown. Hit stop loss 1. (one shake of the towel). But you are smart - you
stop loss is far away, you are still in the trade.
The traders expect the price action to bounce again at S but the bankers take
the price right thro - another load of stops hit!! (another shake of the towel).
Traders now expect the price action to go short. But the banker plays tricks
and snaps the action back to long - more stops hit. (shake 3 of the towel).
At point T another bounce is expected. The banker tricks you by going straight thro and going long like there is no tomorrow!!
(4th shake of the towel). By this time the banker hopes to have everyone’s money. We need an approach that can avoid all of
this!!
Clearly, indicators cannot take into account these type of emotions and actions. Indicators are great if all we are dealing
with is robot style price action.
But with traders emotions at work, the price action ratchets up and down and no lagging indicator that measures just closes can
hope to keep up. That's why, with indicators, you will be at a great disadvantage competing with those who trade price action
right up to the second.
That is why the real power of this thread starts only now. But the material beforehand was a necessary pre-requisite to
understand what we are going to do.
Now look at the next diagram

For traders who entered at E, the bankers would be rude at point R with a
sudden retrace causing stop hunting. Then they would see all the suckers at S
by sending the price thro the SR line, hence hitting more stops. Then they
would laugh at point L when they suddenly snap the short action back to long
unexpectedly, causing more stops to be hit.
Then finally, a trick at point T when the small traders expect a bounce and
there is none - final stops hit. In this case, the big boys have had 4 shots at
trying to take other peoples' money off them.
This could happen to us quite easily if we used only indicators or if we are not
wise to these actions.
So what is the solution....?
The solution is to see the downtrend at point D (in blue). We have a method for tracking point E but we do not enter because we
know what will happen. Our specialized method causes us to enter at point P when all the action is over!!
We then go along for the trend ride and make a profit!! So what is this fancy specialized method that we are going to use?
Naked Trading Method.
To summarize......
• Use the indicator method at your own peril.
• I cannot and will not endorse it.
PART 2 - THE COUNT BACK LINE
- backbone of our naked trading system.
The count back line is a procedure by which we get to enter at a certain point after the most extreme candle. It is impossible
without hindsight to see the top or bottom candle of a trend, but with this approach, we actually do spot that candle and set an
entry from it. So how does it work?
Here we have a downtrend and the lowest candle is chosen (the last candle in
the trend). By lowest candle, I mean the low of the candle. In downtrends, we
always consider the low of the candle when drawing a count back line (CBL).
A line is drawn to the top of the candle, then left till it hits the next candle, up
to top again, left, then top. (3 candles are involved).
The final line is extended to the right and becomes our LONG ENTRY line for
when the trend goes up again.
LONG ENTRY RULE

So the Rule is…..top, left, top, left, top.
We now wait for the next candle to develop and finish. It is a doji candle - that
does not matter.
It is lower than the last so we do the following same procedure as before......top,

left, top, left, top. We then extend the line to the right and it becomes a new
lower LONG ENTRY line.
We now continue by waiting for the next candle.
Again it is lower to we again set up the count back line.
top, left, top, left, top - extend right.
We end up with the same entry line as before. With a

downtrend the LONG ENTRY line will go down, we never
raise it.

We wait for the next candle to finish. It is lower again, so we draw
a new count back line
The entry is in a new position.
The next 2 candles are not lower than the candle B from which we
drew our last count back line (CBL) (Figure 1)We do not draw
count back lines from these 2 candles because they are not lower.
By lower, I mean the low of the candle. This is the point in

question. We have to wait for a long red candle before we get a
lower low. From here we draw the CBL (Figure 2)
Figure 1 Figure 2
Important CBL Points.....

The CBL skips across candles 1, 2, 3 because they have highs that are not as high as candle C. If the candles would have the same
high as candle C, then we would still skip across the top. We then hit the side wall of candle B.
Note that candle 1 does not have an upper wick - its high is also its open. The high/open of candle 1 is not as high as candle C -
hence we skip across the top. We end up with a new LONG ENTRY line. Sooner or later, the trend is going to change to an
uptrend.
The price action will then hit our LONG ENTRY line and we will enter
long. We now have an even lower candle - the yellow candle. The
lower wick (low) is way down. We draw the CBL (Figure 3)
As the trend goes down, our long entry price is dropping steadily.
Figure 3

The next candles are different (Figure 4)
Here candles 1, 2, 3, 4 have their lows not going as low as candle L.

Therefore, we do nothing but wait.
The Next chart shows some action>>>
Figure 4
Here the price action is starting to reverse to becoming an uptrend.

Our CBL entry (LONG ENTRY) has hit a yellow (up) candle and
hence we enter LONG at that point. OK then but that does not look
very exciting. The price is hardly going up.
Are we really going to make a profit?
Well, here we have our answer
The LONG ENTRY CBL is shown and the

price action has really shot up since then!!
Important
Note the position of the stop loss.
It is easily figured - it is at the point of the

lowest low. So now we know how to draw
and set a count back line. It can be done on
any timeframe.
The above candles were taken from a 4 hour

chart. The count back line will become the
major tool for our entries. At this point we
can use the SR lines as exit points.
Remember we use a 2 contract strategy for money management. Therefore, we have 2 exits - one at an early SR line and one at a
later SR line.
I have shown you how to draw a count back line when the trend is down and we are looking for an entry into a reversal, that is, an
uptrend. I must now show you how to draw a count back line for an uptrend when we are looking to enter into a downtrend.
(Confusing but the diagrams will make it clear).

SHORT ENTRY RULE
OK, now I show you the same operation for an uptrend. The trend is
up this time and we look for the highest high.
From there we draw the CBL.
It goes........... bottom, left, bottom, left, bottom.
As before, we then extend the line to become our SHORT ENTRY

line. We continue by seeing that the next candle has a higher high
Look at Error! Reference source not found., the same procedure as

before - bottom, left, bottom, left, bottom. Extend to the right to give
new SHORT ENTRY line.
Now look at Error! Reference source not found., we forget about candle A because it does not have a higher high.. But the next
yellow candle does.
Again, the CBL, the short entry line is much higher now, giving a better short entry. This is also the last of the higher high
candles. After this one, the trend started downwards.
Figure 5 Figure 6
Now to look at the whole picture >>>
The stop loss is placed at the highest point. The

count back line came from this point as in the
previous chart. The SHORT ENTRY line is
shown. It crosses the lower wick of a red candle
- we enter here. The rest of the trade is a roller
coaster ride downwards!!

Here is a complete operation using the SR lines and the count back line for entry
Explanation.
The SR lines from a daily chart

are drawn and I have made them
easy to see by using different
color bands between the SR lines.
There are 5 SR lines in all with
the bands in between being (from
top) yellow, green, yellow, blue,
grey, orange. A downtrend is
shown, starting with a high
candle that was the top of a
previous uptrend (not shown on
the chart). The high candle also
touches one of the SR lines.
These lines mark turning points
so that is not surprising.
So there was an uptrend (off the chart) - it hit the SR line and reversed into the downtrend that you see on the chart. The high
candle also has the stop loss drawn alongside it. (red dashed line). From that high candle, we draw a count back line to give us a
SHORT ENTRY line (blue line). Check for yourself that I have drawn the count back line correctly.
The Trade
We enter the trade with 2 contracts by entering SHORT at the CBL. As the trade progresses, we hit the first SR line (green/light
yellow). Our first take profit (TP1) should really be about the same as the stop loss (SL) so this point is not enough pips. We let
the trade run. Our 2nd SR line (yellow/blue) is better. Here we can exit our first contract for a profit.
The 2nd contract exit is up to you - we have 2 choices. The first choice (blue/grey) if you are conservative. The second choice
(blue/orange) if you are daring. Remember, the price action could turn anytime, so it a really daring move to go to the second
choice (blue/orange).
TQ- I assume the same entry rule applies as to the close of the candle. Even if our entry price is hit we do not enter until the
candle closes?
TA- You have a choice here!! Enter upon close only or Enter as soon as price action touches the CBL. Whichever choice you
make, be consistent.
I ask that readers do 2 things which are essential for good trading on this method..........
1) Practice loading SR lines on your demo charts. Take them from the daily + 4 hour charts.
2) Practice doing count back lines. Get this operation so good that you can do it in your sleep.
User Input: Higher timeframes are used to provide "guidance" for trading - basically they identify the direction in which you are
going to place your trades for the session. If the higher timeframes (4h, daily, weekly) all show an uptrend, then your bias on the
shorter timeframes (1h, 30m, 20m, etc) should be upward - that is, you will be going long on your trades.
If the higher timeframes show a downtrend, then on your shorter timeframes, you will be going short.
So, what happens when your shorter timeframes don't line up with your longer timeframes (that is, the longer timeframes show an
uptrend, but the lower timeframes show a downtrend)? You wait. Patience is the key, here.
Do not go short when the trend in the higher timeframe shows a bias for longs, you are more likely to be stopped out. The same is
true for going long when the higher timeframe bias is for shorts.
Now - to apply it more to Tymen's method:
Disagreement between the two timeframes (say the daily and 1h) is good!
You start drawing your CBL's when this disagreement is occurring, so you can get the best possible entries! This prevents you
from jumping in the middle (or even worse - just at the end!) of a trend, so you can maximize pips!
As I see it, the idea behind these CBL's is to get into the trend identified by the higher timeframes at the optimum time on the
lower time frames. This lowers your risk, and increases your gain - making your Risk/Reward ratio more favorable.
Outline so far of the naked trading method
STEP 1- Pick a daily chart and find at least 2 SR lines, one on each side of the price action.
STEP 2- Switch to a 4 hour timeframe and add some more SR lines. The total number of SR lines on your chart should be about
5/6 in all. Do not add too many or it will clutter your chart.
STEP 3- Stay in the 4 hour chart. When the price action starts to approach an SR line, then begin to construct count back lines. If
the price action bounces off that SR line, it will eventually cross your CBL and you have an entry. If the price action continues
and ignores the SR line, then you will have opportunity to construct a new count back line when the price action approaches the
next SR line.
Note that the CBL will give an entry in the opposite direction that the price action is currently moving. That is, if the price action
is going up, your CBL will give an entry for going down (short). And vice versa.
STEP 4- When doing entries stop worrying about the spread. Your entry is your entry. The spread is included in it. For example,
if your spread is 3 pips, then you have to make 3 pips after entry before you make profit.
STEP 5- Do not forget to set your stop loss at the high/low point of the 1st candle in the CBL. Do this in the 4 hour chart.
STEP 6- Set your TP1 at the next SR line in the price direction. Set your TP2 at the 2nd SR line in the price direction. Do this in
the 4 hour chart. After entry, retracements may occur, causing a drawdown. But a trade is not complete until either the TP or the
STOP LOSS is hit.
So we wait until one of those two happens. Since we are entering 2 contracts, we simply keep going after the TP1 is hit. The stop
loss is moved to break even, and then either TP2 or the stop loss will be hit. When one of those is hit, the trade ends.
Here is a diagram showing the steps outlined Practice the

above on your demo chart and see how you go. Do not give
up if the price action hits the stop loss instead.
I now here show what is optically, a more pleasing way for

you do draw the count back line (next page picture)
Figure 7
In this new way of drawing, the rule is still....... bottom, left, bottom
left, bottom.
However, when you go left, draw right in to the centre line of the
candle. That is, when you go left if you hit a wick, you go alongside
the wick. If you hit a body, you go into the body to the centre line of
the body.
The diagram shows it clearly. You will find it is an easier and more
visually pleasing way to draw the count back line.
TQ- …. I think it will be interesting to share our ideas about this

strategy, you'll find this chart, not convinced about it, what do you
think ?
TA- According to your chart The CBL is drawn correctly and you
hit the stop
loss. Bummer!!
But now look at
this >>>
Here I have
drawn the 2nd
CBL that would
result from
your trading.
It gives the same entry line but now look at the profit!! TP1 is clear but I
cannot place TP2 on your chart because of lack of SR lines.
Further, DO NOT use pivot point lines - they are calculated lines according to
a formula. Therefore, effectively they are an indicator. SR lines are direct
observations from the price action and are not mathematical manipulations
such as pivot lines.
TQ- Don't forget to factor in the spread to the prices that you want to enter at/exit at.
TA- NO!! Forget about the spread!! Just enter the trade. The spread will quickly be paid as the trade goes into profit.
The idea behind the SR lines and finding appropriate count back lines is not to make heaps of pips. I do hope your practice is on a
demo account. It does not matter if your trades hit the stop loss. It is the practice of this approach that is important - to get
acquainted with it.
Let me post an example myself >>>

Here I have set 3 blue SR lines from the daily
chart of AUD/JPY Here I go to the 4 hour chart
and add 1 more pink SR line
I have chosen 4 trade areas, 3 long, 1 short.
Here is the 1st trade and its associated stop loss
The price action goes completely short, (see main chart,

previous post). As a result, the CBL never cuts thro a candle
and the trade is not filled.
The 2nd trade
The CBL and associated stop loss are shown. Observe that
the TP1 which is the SR line, is very close to the initial entry
at the CBL. There is little profit in TP1 here. But TP2 is
much better!!

Here we have the 3rd trade
At the beginning the price action was going up and a CBL for
short was set up (red lines). The stop loss is shown. Also
shown is the TP1. After price action hits TP1, we move the
stop loss to break even as shown on the chart. However, after
TP1, the price action went up, going against us. So
eventually it hit the break even stop loss. Result - TP1 profit
only.
Here we have the 4th trade
The CBL and stop loss fall into place nicely and sometime
later the entry is triggered. To see the rest of the action I have
to zoom out, so much so, that I have to revert to a daily
chart!! >>
The CBL entry is a short green line, the stop loss is the
dashed red line. The TP1 gets filled, the TP2 is still yet to
come!!
Error! Reference source not found.
Remaining Page Left Intentionally Blank

Part 3 - IMPROVING THE RISK/REWARD RATIO.
At this point in our thread, things start to hot up and get exciting!! If we can now get more pips profit for less risk, we are well on
the way to developing a quality trend trading method. Some very unexpected surprises are yet to come!!
Then we will work on improving the win/loss ratio as well and so we will end up with a super trading method!!
Our 1st step in improving the risk/reward ratio is extremely simple after drawing the SR lines from the daily and 4 hour charts, we
move on to the 1 hour charts!! We use the 4 hour chart as our home chart and the 1 hour chart as a timing chart.
Lets see what happens when we do this....... For an example, I am going to use that 4th trade in my last trade examples.
Here again, is the daily chart And below is the 4 hour chart
The green line is the correctly drawn CBL taken from the lowest candle.
Now lets go down to the 1 hour chart

The green line marks the CBL entry line. But it is too difficult to see. Lets magnify it >>>
The old entry line (green line) can be seen at the top of the chart. The new entry line (pink) is in the centre. Note that the new
entry line is also below the immediate SR line. We have to be careful here that we do not confuse SR lines. That is why we
monitor the trade on the 4 hour timeframe.
The difference between the 2 entry lines is enormous!! In fact a total of 92 pips (100 pips round figures!!). So lets have a look at
some percentages.......
Stop loss = 78.18 Old CBL entry = 79.68 New CBL entry = 78.76 TP1 = 82.58 TP2 = 89.14
OK, some math.......
Before (4 hour) After (1 hour)
Worst reward is..... TP1 only = TP1-old CBL = 290 pips. Worst reward is.......... TP1 only = TP1-new CBL = 382 pips.
Risk is....... stop loss-old CBL = 150 pips. Risk is.......... stop loss-new CBL = 58 pips.
Worst Risk/Reward = ~ 1:2 Worst Risk/Reward = ~ 1:6.5
Best reward is....... TP2 + TP1 = 946 + 290 = 1236 pips. Best reward is TP2 + TP1 = 1038 + 382 = 1420 pips.
Risk = 150 pips. Risk = 58 pips.
Best Risk/Reward = ~1:8 Best Risk/Reward = ~1:24
That last figure is a staggering improvement!! ....... 1:24 compared with 1:8
Lets consider the percentage improvements......

• In this trade, if we get TP1 only, we get a 25% improvement in profit.
• In this trade, if we get TP1 + TP2, we get a 13% improvement in profit.
• The risk is reduced by an amazing 60%.
So you can see that just by using a 2nd timeframe we greatly improve our trading efficiency.
NOTE - we do not go down to a very small timeframe. If we did we would experience waves like the sea and this would
confuse us. There is a practical limit to how far we can downsize.

Exercises
1) Set up your SR lines on the daily/4 hour as before.
2) When the price action approaches an SR line, switch to a 1 hour timeframe (timing chart) and set up the CBL from there.
3) Once the CBL is in place, wait for an entry. Use the 2 contract money management method (TP1 + TP2).
If you practice this diligently, you will see how simple this method is, and you will also start to make some substantial amounts of
pips with little risk!! But beware!! Practice on demo only!!
All the work everyone is doing is basically just practice. Practice for what is to come. This is all I can get you to do while I am
away. We are nowhere near the final method yet. Those who are participating here have the clear advantage - you are learning by
experience!! All the hangers-on who are just reading this thread are getting none of the practical benefit and experience needed to
competently trade the finished system.
Who has the greater benefit is learning to play a guitar - a person who learns just from reading a book or someone who not only
has the book but also a teacher who teaches then how to play from the book? So it is here - those who participate are discovering
all sorts of things including their own levels of confidence and ability to withstand pressure. None of these things are available to
the watchers-only. So I say to all of you who are reading this thread and not participating - get off your backside and give your
demo account a solid workout. You will reap many benefits in doing so!!
Recently we appear to have identified a number of things.......
1) The SR lines appear to be very subjective - one is tempted to put them far away from the TP1 position so as to maximize
profit, even if the line is not really a good one.
2) The risk, cut down on the1 hour timeframe, still appears to be large. Merchant Prince has in particular lamented at this -
I have good news for him ahead!!
3) Although the wins seem to be reasonable, the losses are coming in too frequently and could well put off a new trader.
An entirely new approach is about to arrive!! (surprise!!)
The present work was to get you to be familiar with the workings of the CBL (which stays), and the operation of the 2 contract
trading method for money management. The SR lines give practice on vigilance. We are about to embark on the use of any
timeframe to give a risk that suits the particular trader. We are going to compare the abilities of the SR lines vs the Bollinger
bands regarding the price action analysis and setting of the CBL.
Even in our naked trading, it looks as though we are going to need one indicator to guide us - not tell us what to do as in say a
MACD or stochastic, but just a guide. We are looking to use the Bollinger bands as a substitute for determining SR levels. The
BB do an excellent job at showing up extreme points, and they do this without all the subjective feelings that we may put into our
SR lines. So the BB will become our new SR lines!!
It is a little tricky to get the syllabus to be in logical sequence at this point so I will start a chart for openers.

Here is a CBL with the SR lines in color and the BB
overlaid.
Without the BB, you would start to consider your TP1 exit at
the yellow/white border. But with the BB, you can see the
outer bands expanding at this point, going for a bubble or
sausage. (see, we have not wasted our time learning this -
there is a sequence to my curriculum!!)
So with the BB, you would not bother with this SR line at
all. Instead you would wait until the black vertical line when
the opposite BB begins to contract. This is the same point at
which the yellow/blue SR line appears!!
So, not knowing yet whether this is going to be a bubble
(price retraces firmly) or a sausage (price regains strength
downward), we could put a TP1 at this point.
After this point, the price action retraces, but a few candles
on, we see the price action re-testing the yellow/blue SR line
for the 2nd time. The opposite BB also has a very pointy
shape to it, unlike our familiar bubbles with their sexy round
"behinds".
Ah ha!! - a sausage!! Knowing that we have a sausage, allows us to ignore the test and re-test of the blue/grey SR line and go for
a much better profit down in the grey zone. So this chart with BB overlay shows that the BB appear to do a better job of instilling
confidence in where to exit.
I now need to deal with some troubling matters. The 1st is the case of getting an entry with the 1 hour timeframe using the CBL
while the 4 hour misses out for very good reason. The CBL is really designed for only one timeframe, not going across
timeframes. We used the CBL on a 1 hour timeframe so that it would give a smaller stop loss. But in the process we also get
unwanted entries and entries that do not co-ordinate with the higher timeframe.
So what are we to do to get smaller stop losses? Well, one way is to keep the standard stop loss given in a 4 hour timeframe but
find a method that will give us a much better profit. So instead of making the risk in the risk/reward smaller, we can make the
reward in the risk/reward larger. But how are we to do that?
The 2nd matter is that of looking at the risk/reward ratio more carefully. In forex trading, it is not good enough to have a
risk/reward = 1:2 or 1:3 or similar if we have a mediocre win/loss rate. Most win/loss rates are around 50% or less. Our 2
contract strategy improves that but still not enough for the above risk/reward ratios.
It is these ratios that cause forex traders to fail. A reward twice or three times the risk, with a basic win/loss rate does not let your
profits run. You only need to have 3 or 4 losers in a row and you are in real trouble. You are now behind, running at a loss and
this needs to be made back again before any real profit is made. That is a difficult ask and for this reason most methods out there
fail in the hands of the general trader.
Assuming a mediocre win/loss rate, we need a method that has bite!! A method where you can let your profits go like there is no
tomorrow!! A method where your profits run like the wind and, therefore, the risk is tiny in comparison.
It is then that you can afford to lose several trades in a row. Even after that you are still in profit. Now that is a method that
works. So we will be looking at this idea.

A 3rd matter is that we want to be able to trade all timeframes, not just the daily and 4 hour.
These are attractive timeframes to trade, but another way to cut the risk is to operate the CBL on a shorter timeframe. In such a
case, both the risk and reward will be smaller, but will appeal to those with less funding to execute a trade. So we need to look
into this as well.
Having experimented with the SR lines I think we can all agree that there is not much potential for major profit runs with these
lines. One can be tempted to ignore close SR lines and go for the ones further away, but this goes with the attendant risk that the
price action could bounce and retrace. In any case, there appear to be severe limits on your profit potential with these lines.
So lets look into this and see how we can improve our risk/reward ratio while keeping the CBL in the same chart.
Lets have a look at a trade. This is a 4 hour chart of

USD/JPY with a whole lot of SR lines on it
The BB have been overlaid on the chart. We start with a CBL

which is taken from the low of a downtrend. The trend goes
up after this and we get an entry with 2 contracts at the
squeeze of the Bollinger bands. Yes, trends are often born in
BB squeezes - MUST KNOW!!
We sit and do nothing while the BB expand. The opposite

BB contracts at the black vertical line and here the price
action has retreated to the mid BB. No worries, the mid BB is
going up and we are in the trade until EITHER the price
action hits our TP OR hits our stoploss - whichever is first.
Leave the trade to go - do not micro-manage it. The price
action pleases us by going up.
It then enters the area where we have drawn our many SR

lines. Now we know exactly what to do, don't we? We do
know what to do - yes?? Hmmmmm. Which one tells us to
exit?
The fact is that all these SR lines have rendered our chart meaningless. The Bollinger bands, on the other hand, clearly show us
that we are in a BB sausage. We can make good use of that fact.
I humbly submit that those who use SR lines only, face trading problems of their own. That is, the SR line trading method
is not some holy grail - it has its problems just like any other method. The great advantage of SR lines and CBL is that
they are not lagging indicators. The Bollinger bands need not be a lagging hindrance to us either, if we use it as a guide
rather than a timing device for entries and exits.

Lets now look at exactly the same trade using the
simple exit method.
Same CBL as before and the same waiting for the

black line. The simple exit method relies on price
action hitting the BB, then exit on the 1st candle that
pulls away from the BB. The exits are shown.
Now we look at the same trade again using the other

method of exit for the BB sausages, the parabolic sar
In this case I have used the parabolic sar dots. The

exits occur when the sar switches over and the dots
are projected forwards as can be seen on the chart.
The trade is a 2 contract entry, hence 2 exits - TP1
and TP2.

This is the same trade using the same parabolic sar but
in line mode instead of dot mode. This is done in case
readers have problems seeing the dots
New and radical method of determining exits.

I have not shown this method before. This method will indeed let our profits run. It involves use of the Fibonacci lines.
Fibonacci lines are not an indicator and this approach does not lag.
Stage 1
Lets look at the same chart again with an application of Fibonacci
The Fibonacci tool should be in every trading platform including MT4. It is

very easy to use - click one end point and drag to the 2nd end point. My 1st
two points are labelled P and are the end points of the first upward trend. The
blue line shows the lowest retracement line.
We note that in the area A, there has been no close below this blue line.
Therefore, the probability that the price action will continue going
upwards is greater than that of retracing. We, therefore, do nothing, and
let the trade run.
Now to stage 2
We have had another nice run upwards, and when the price action starts to
retrace, we identify the extreme points and use the Fibonacci tool again. The
extreme points are labeled P again. Again we have a blue line. At area B,
there is no close below the blue line, so we do nothing and let the trade run.
(the probability rules apply again).

<<Now to stage 3
Exactly the same thing again!! The extreme points of the last upward trend
identified and labeled P.
The same blue line and retracement area C comes nowhere close to it.
As a result, we do nothing and let the trade run as before.
Stage 4 >>
The same scenario again.

Area D does not even come
close to the blue line. Do
nothing and let the trade run
<<Stage 5
Ah ha!! Here we have a

different scene!!
After identifying the extreme

points of the latest uptrend,
the retracement crosses thro the Fibonacci blue line.
At this crossing point we end our trade!! What a spectacular run!!

Now to compare the different exit methods to see which
gave the best exit.
The Fibonacci exit came out way in front!! The risk/reward

ratio in the simple/parabolic sar approach is approx 1:1.
(the TP1 is an added extra). That is not good.
The Fibonacci is approx 1:2+ Not the best but a whole lot
better than before.
There are problems with this approach of course. If the first

retracement hits the blue line, we have an exit that would be
far worse than using the other methods.
We note also a very important point here. The Fibonacci

exit method does not need the Bollinger bands. The
Bollinger bands would only be used to locate extreme points for drawing the CBL. We still have one major problem to
overcome......
Regardless of what we do, picking the location of the CBL is tricky. Sure it is at the extreme of a trend. But far too often, after
correctly drawing the CBL, we enter only to see the price action reverse on us to hit the stop loss instead. It does not seem to
matter whether we use the SR lines or an extreme on the Bollinger bands - the losses continue!!
We need to do something about this. Our win/loss ratio is absolutely shocking. If we can improve the win/loss ratio then we can
get our confidence back and also the risk/reward ratio does not become so critical. We have started with the 2 contract strategy
but we now need to do something major. What will it be? Believe it or not, we are coming towards the last stages of this
thread.
CBL Trade Rules Foundation

Lets take stock........
• We are trading trends. • We want our CBL to be on the home chart.

• We want to avoid indicators. • We only want to use one chart.
• We want our method to be easy to understand/use. • We want to use any timeframe that we choose.
• We want to have a high win/loss ratio. • We want our exit method to be user friendly.
• We want to have a high risk/reward ratio. • Are there any other requirements?
The work from here on gets quite tricky. Are you sure that you are up to the task?
I am not driving you away, but I would have thought that you would have preferred a simpler thread with a simpler trading
method. You must learn to walk before you can run. This is not a thread for beginners - there is enough of that stuff already on
this forum.
I do give you fair warning that from here on you may find the material very difficult to understand. I make no apology for that. I
am posting a choice system that works. This system (method) is for dedicated elite traders only, but it requires some years of
trading experience to implement properly.
So if you find it hard going, my advice to you is to bow out now and find something more within your grasp. If you fail to grasp
the concepts and principles described from here on, you will not be able to trade using this system to come. You will fail badly
and lose money in large amounts.

Finally, I make it clear that I refuse to accept blame for other people's losses if they use my systems or go by my
recommendations. I simply do not have any control over how you trade, therefore, the consequences of your trading are yours
alone.
All of the above requirements that I stated can be met. We do need to have something on our chart - even naked trading uses SR
lines. I believe that using the Bollinger bands for detecting our entries is a better way to go, since the BB detect extremes in the
standard deviation function. The BB allow for excellent placement of the CBL if only we could win all the time.
That is the one big problem we now have - the win/loss ratio. And it is to that problem that we now turn our attention in
another amazing unpredictable way!!
EXERCISE
You have 2 trading choices.....
1) Opening a trade going for 100 pips with a risk of 10 pips. (risk/reward = 1:10). But the win/loss ratio is 50:50. That is,
the chances of losing this trade are just as great as winning it.
2) Opening a trade going for only 15 pips with a risk of 10 pips. (risk/reward = 1:1.5) But the win/loss ratio is 98% chance
in favour of winning. (win/loss = 98/2).
Which trade would you choose and why, [you only have one trade to do] ?
TQ- Cordite help me for remember to speak about fibo extensions , right
TA- The Fibonacci exit method does allow us to get greater pips by prolonging the exit point. It does this by allowing the trade to
"breathe" during a retracement period. However, there is one drama with it which I will describe below...... Here is a simple
diagram of price action
The trend is up and the red sections are retracements. The problem is that the retracements do not produce profit. They are
stagnant areas where we simply diminish what we
have already.
Imagine this being a daily chart. You could be in

retracement for 10 days or more!! What a waste of
time!! What a waste of trading opportunity in another
currency/timeframe!!
Would it not be better if we traded the blue sections

long and the red sections short? Yes, a few more
spreads, but a whole lot more pips for us!!
That way, the red sections are working for us and not
against us.

Exercise Answer
(A User Answer First)
If I did 10 trades. 100/10 profit/loss, 50/50 win/lose ratio, 5 wins at 100 pips=500 pips, 5 losses at 10 pips= 50 pips
Net profit is 450 pips ( not counting the added gray hair from the 50/50 )
If I did 100 trades = 5,000-500=4,500
If I did 100 trades. 98x15 pips = 1470-20=1450 pips profit
Which method would I prefer?

Method 1 would require deep pockets and lots of confidence...and patience.
Method 2 would probably require a lot more time at the computer.
I think I would prefer method 2. One in the hand is worth 2 in the bush...at least on the nerves anyway.
Method 2 would also enable a trader to increase the value of each pip progressively as he went along.
OK, back I am and to answer the whole matter in detail. The original question was meant to say that you had only ONE trade. A
lot of readers assumed 2 trading methods and that is completely my fault - I did not make myself clear.
My Analysis of the Answers
I think it would be reasonably fair to assume that if you only had ONE trade, then, faced with these choices, you would choose
option 2. With option 2, your pips, even being less, are at least guaranteed (almost) whereas in option 1, you are effectively
gambling in the hope of a much greater gain.
What is most interesting, however, is the division between the two groups of answers assuming an ongoing series of trades.
The hardened mathematicians go quite correctly for option 1. The people who can see emotions coming into play prefer the safety
of option 2. Lets look at some interesting points......
................
Is the need for comfort so great that you would settle for a method which is more than three times less profitable?
..............
To this I would say yes to those who are new traders who need every bit of confidence they can get and also those whose funds
are very limited and would get very nervous at the sight of 3/4 losses in a row. When I first started trading I punched $600 losses
into my account on a regular basis. But then I was a bit of a wild guy. I have always believed in going right out on a limb!!
Back in my earlier days I used to go hang gliding and I made a habit of jumping off high sand dunes and regularly crashing my
aircraft. Not so funny landing upside down all the time, especially when you are harnessed in!!
My forex trading got the same treatment when I started!! Today I am much more polished and markedly more conservative!!
We are on terrafirma - and the more firma, the less terra!! I know the danger of losing your money and I fully understand the
need to have a highly rated win/loss ratio.
Maybe this post sums up the whole position best.....
................
#2 would be the better option because many would deal with emotions too.
If we are robots it would work with #1, but reality would dictate for many #2.
................
This is what I am inclined to think too!!

A start out would dictate the use of option 2. But when you are financially secure, you could choose option 1 for greater profits
while putting up with the frustrations of 3/4 or more losses in a row.
But wait a minute!!
If you had a system which had such a high win/loss ratio would you not work it at a much higher lot value? That is, would you
not exploit that advantage for all that it is worth?
What do readers and prospective new traders look for on this forum in the way of a trading system.
Something that is complex - NO.

Something full of indicators - maybe.
Something with a high risk/reward ratio - most new traders do not understand the term, let alone realize its significance.
But what happens when a system with a high win/loss ratio comes along - people gravitate to it like bees to a honey pot!!
I proved this conclusively some time ago when I scored 2000 posts. I then posted a hoax system as a joke and called it the
greatest winning system ever. Now just about everyone on the forum jumped on the bandwagon - except a few experienced
traders who did not want to be embarrassed!!
So I think we can conclude this exercise at this point by saying that a high win/loss ratio system is the best confidence booster that
there is!! If we have such a system, then we can trade larger amounts and compound our profits!!
This is certainly the way to go, and with that final comment I now embark on continuing this thread by showing you how we
develop our system to a win/loss ratio of about 90% or more!!
PART 4 - THE D.N.A. OF THE BOLLINGER BANDS

This topic is absolutely revolutionary and is at the heart of my trading method. I am extremely reluctant to post this material
because I classify this as basically secret. So, most importantly, I do not want hangers-on going beyond this point. If you have
little trading experience, or are just being casual, stop here now. The stuff here will be beyond your ability to use!!
At the outset I say that we will also try to improve our risk/reward ratio as well. But I think we should realize that my above
example was rather extreme - a risk/reward ratio of 1:10 is a very rare thing indeed. Much more common is a 1:2 or 1:3 ratio.
With a win/loss ratio of about 50/50, such trades can get you into trouble very quickly without astute money management. So we
will work on the win/loss ratio now and look again at the risk/reward with the Fibonacci method - the retracement value I used
was the 38.2% level.
It was some time ago that I was reading my copy of John Bollinger's book "Bollinger on Bollinger Bands" that I happened on
some sort of discovery. I remembered what I had discovered and in the days afterward I looked further into this and discovered
even more and the outcome was quite startling!!
Yes, I had made a discovery!!
Whether it is new or others knew about it I do not know. What I do know is that this stuff has never before been made known
anywhere. And it is the stuff from which a 90% or more win/loss ratio is generated!! I put it to extensive tests and it passed with
flying colours every time!! This amazing method was rock solid and did not fail.
What is it?

It is the DNA of the Bollinger Bands!!
Now I am going to firmly introduce you to the Bollinger DNA system.In

order to do that I have to take care of knowledge assumed, that is, to make
sure everyone is on the same footing. I am sure that most people know about
DNA, but I will just revise the biological basics here so that no one misses
out. Please understand that I am not trying to insult your intelligence. I just
want to make sure that every reader here has the same background
knowledge. You never know when someone misses out. Tonymand and
o990l6mh, both Honorary FX Members and medical people, will of course
know much more about this than I will ever know. I am only a school
teacher!! Anyway, the background for starters........
This diagram, taken from an ancient secret text, shows the 2 strands of
nucleotides making the "uprights" of the "ladder"
The deoxyribose (pentagons) and phosphate groups (dots) make up these

uprights while the ladder "rungs" are made up of 4 nitrogen bases.
These bases are shown in the next ancient manuscript . There are 4 bases
linked in twin pairs - adenine, guanine, cytosine and thymine.
Lets now look at how this is similar to the Bollinger DNA system.......
The nucleotide uprights of our ladder are two uprights. They are the two
outer bands of the Bollinger bands.
The rungs, the nitrogen bases, are the price action elements as the price
oscillates between touching the BB.
This idea may not be so original, but the sheer power comes in when we use
a 2 contract strategy to trade with. We have many trades, in any timeframe, with an extraordinary degree of reliability in making
a profit.
Lets go into the method in detail by looking at the 4 types of price action that are contained within the Bollinger bands.
I will use diagrams to outline these and use colors to distinguish between the 4 types of price action.

This is a basic first diagram showing what we are trying to
do. Ignoring the mid BB for the moment, we are trying to
enter a trade at one of the outer BB and exit when the trade
reaches the other outer BB.
Thus we are trading the rungs (the 4 bases) of the ladder (the
outer BB which is the nucleotide chain). The principle is
that simple.
There will be lots of trades, they are short in duration (unless

you are trading the daily) and with the method explained
below, become very profitable.
Here is the first of the 4 types of price actions. The trade is

entered at the lower BB and exited at the upper BB.
Note that the mid BB is going in the same direction as the

price action when we are halfway thro the trade.
The first type going the other way. Note again that the mid
BB and price action are going in the same direction when
halfway thro the trade.

Lets now have a look at something which generates the
second and third types of trade
In this case we see that the mid BB and the price action are
going in opposite directions. After entry we reach the
halfway mark and note that the mid BB is going in the
opposite direction. Therefore, we set our TP1 at the mid BB
and the TP2 at the other outer band.
With the mid BB in opposition, we will at least hit TP1 but it

is unlikely that we will hit TP2 at the other outer band. After
TP1 is hit, we set our stop loss to the entry point to break
even. (Note that the entries are done via a modified CBL)
Sometimes we get lucky and the price action continues onward past the mid BB to hit the opposite outer band and give us a full
trade profit of TP2 as well. But mostly it is not like that and we are content with TP1 only.
Now examine further......I have shown the rest of the price action in red in its unsuccessful format. It does not go to the opposite
outer band but instead retraces to the break even point. Sometimes it goes right back to where it started - the original outer BB.
(point A). Sometimes it retraces to break even and then goes on to the opposite band (which we wanted in the first place), but it is
too late then. (point B). The break even point has been hit and the trade is over.
Note that the green price action is type 2 and gets a TP1 PROFIT ONLY. The red price action is NOT TRADED. The red price
action is type 3 and is a LOSS price action. Here is the 2nd version of the red type trade that you will cme across.
This one is responsible for any losses in this method!!
The trade starts out but the price action fails to reach even the
mid BB. It retraces before the mid BB, thus nullifying hopes
of hitting even TP1 when placed on the mid BB.
This price action could retrace right back to the original BB or

do some retracing, then go on anyway to the opposite BB.
When we see a price action failure to reach even the mid BB,
we apply Fibonacci with the end points being entry and point
P. The blue line is 38.2%.
If the price action goes thru this blue line, close and post a
loss. It does not matter whether the price action returns to the
original BB or the opposite BB - we have a loss and that's
that!! However...............
If the price action fails to reach the mid BB and the price action does not go thro the Fibonacci 38.2% blue line, we then stay in
the trade!! The price action will most likely reach the mid BB (TP1 ONLY). (Shown in pink) Sometimes it may even pass thro
the mid BB (TP) and then reach the opposite BB (TP2). (pink trade).
I will now name these 3 price action types so far so that we can refer to them.
1. O - O ..............Outer to outer BB. This is a simple trade where the mid BB is in agreement with our trade direction.
The TP1 and TP2 are both set on the opposite BB. (This price action is shown in pink).
2. O - M ............Outer to mid BB. The TP1 is set at the mid BB because the mid BB is against our trade direction and
there is a very high probability that the TP2 will not be met but break even instead. (This price action is shown in
green).
3. R - O .......... Retrace back to Outer.. In this case price action can do 2 things........
a. Starts from the mid BB and returns back either to the original BB or the opposite band, we do not know which.
(untradeable).
b. Starts out as an innocent looking trade but fails to reach the mid BB.
Trouble from hereon. The price action retraces and a Fibonacci test is applied. If th price action goes thro - we post a loss. If
the price action does not goes thro - we stay in the trade. This price action type is untradeable and this is where losses occur.
(This price action is shown in red).
The 4th type of price action is very simple and will now be shown.
The 4th type of price action is very simple again
In this case the mid BB is very much in agreement with us and

after entry the price action not only touches the opposite BB,
but also walks the BB. The TP1 is set at the 1st touch and TP2
is set at the end of the walk.
After that the price action will leave the BB and go off into
another direction.
This 4th type is named O - BB. ........Outer to Bollinger Band

walk on the opposite BB. This price action is shown in blue.
Live Examples
Here is a BB bubble
We have seen this one before. But now it is so simple to

trade!! Enter short using a CBL at the grey candle on the
BB just in front of the blue square. Watch the price action.
Note that the mid BB is against the trade direction and set
TP1 at the mid BB. TP2 is set at point P, but we do not
expect to get it.
We have a type OM trade..
After hitting TP1, we set the stop loss to break even. To our
surprise and joy, the price action goes on to TP2 on the
opposite BB and we close our trade there.

Another example of how the BB bubble is faithful to us
We enter long using a CBL at the blue square (more details

on this later). Watch the price action. Note that the mid BB
is against the trade direction and set TP1 at the mid BB. TP2
is set at point P, but we do not expect to get it.
We have a type OM trade..
After hitting TP1, we set the stop loss to break even. To our
surprise and joy, the price action goes on to TP2 on the
opposite BB and we close our trade there.
I will go into the details of our modified CBL shortly but first
an exercise to become familiar with OM price action type
trades.......
EXERCISE
• Go to your favorite currency pair and choose your favorite timeframe.
• Scroll thru all the price action on it from start to finish. Count how many BB bubbles you can see (both long and short
trades).
• Note in each one the point where the opposite BB contracts and the price action ceases walking the BB. This will be our
approximate entry point.
Follow the price action from there to the mid BB.
Questions
1) In how many cases was the mid BB against the price direction.
2) Calculate this as a percentage of the total you have observed.
3) In how many cases did the price action ignore the mid BB and go straight thro to the opposite BB.
5) In how many cases did point P (the TP2 point) appear at the junction of the bubble end and the squeeze beginning.
7) Do you notice a consistency?

Exercise Answer
User Answers
7) Do you notice a consistency? Obviously, trading the end of the bubble on it's own is a satisfactory system. It regularly goes to
at least the mid BB and also regularly makes it to the opposite outer BB.
7) Do you notice a consistency? At the end of the bubble there was 92% chance that the PA goes to at least the mid BB and there
is a 50% chance that it makes it to the opposite outer BB.
Both Mystic and Paulmccarthy gave the most comprehensive answers and I will use those as a basis for comment.
I think everyone noticed the very high probability of the price action hitting at least the mid BB and also the opposite outer BB.
This means that at this section of a BB bubble you are almost guaranteed of a profit!! A TP1 at the very least and very often, a
TP2 as well.
How often did the price action not make it to the mid BB (red RO price action type).? - the loss trade. I suspect only rarely!!
Thus the very high win/loss ratio in this area of the BB bubbles.
TQ- Depending on placement of stop loss i think I could have been stopped out 2 times.
TA- We need not worry about the stop loss at this stage. I will show you how this works as we go along. In the above examples,
if the price action did not reach the mid BB and retraced instead, the Fibonacci 38.2% line would decide whether to exit or not.
TQ- One thing that worries me a little is that it’s easy to spot bubbles in hindsight. When trading in real time I have a fear of a
my beautiful bubble turning into a ugly sausage ..................7) Do you notice a consistency? i might be doing this wrong..., but pls
note following observations- a. it is difficult to discern wether a bubble will become a sausage on the fly
TA- Knowing in advance whether we are dealing with a BB bubble or sausage is not really important. This method works
with everything, even level BB. When the price action reaches the mid BB in a bubble you will usually know by then what you
have got. If you see a bubble with the mid BB against you, then set TP1 at the mid BB, then smile because you will probably see
TP2 on the opposite BB hit as well.
The aim of this exercise was not to get you to recognize BB bubbles, although it would have given you good practice at doing so.
The aim was to get you to be familiar with one of the price action types. The use of statistics is an excellent way to go into detail
in the learning process.
Remember that I have been dealing with this method for some time now and are familiar with the concepts. This exercise was
aimed at getting the readers to understand the concepts too. If this exercise has increased your understanding of the OM price
action type in a real situation, then it was well worth the effort!!
TQ- One thing I'm noticing when looking at this is that not too seldom the entry point will occur pretty close to the mid BB, thus
making for poor R:R. This subjectively seems more common on the higher time frame charts, but does occur on all time frames.
Thoughts on this Tymen?
TA- Yes, I noticed this too when I first developed the details of the method!! But the good news is that this happens in certain
cases only. The answer to this lies in the modified CBL which does not swallow as many pips to get an entry. It still serves the
purpose of keeping us out of the worst retracements after entry. Further, we remember that the mid BB is only relevant if it is
going against the price action direction, in which case we are forced to place TP1 at the mid BB.
We now need to go on from here as I have not yet finished explaining the method. We note that since we are trading the
internal " rungs" of the Bollinger DNA ladder, we are generally trading the subtrends of major trends. These subtrends tend to be
very efficient - that is, a trend line place against them would show many contact points.
Modified CBL
I must now show you the modified CBL. Then to show you the stop loss - pretty simple really, the same as before? The modified
CBL are of 2 types - they are easy to do!! I have noted that 3 candles in the CBL swallows a lot of pips and is not really
necessary in these DNA trades. We instead employ 1 or 2 candles.
The chart explains it best with the 2 cases of CBL
Here we have two cases of extreme candles on the BB

indicating a trade. The CBL in each case is different,
showing the 2 modified types........
In the first case, we use two candles if the previous

candle body is smaller than the extreme candle.
In the second case, we use only one candle if the

previous candle body is larger than the extreme candle.
In both situations, if we have used the original 3 candle

CBL, our entries would have been so close to the mid BB
so as to give very little, if any, TP1 profit.
Special cases
Sometimes candles do not fit neatly into the system.
We cater for those as follows Error! Reference source

not found., Here are 2 trades, the first being a trade
operating in the contraction period of a BB bubble.
These are the ones where we gathered all those statistics.
The first trade is outlined in full.........
A 2 candle CBL is used because the previous candle

body is smaller than the extreme candle. This CBL is
drawn on the chart and hence the entry point is shown.
The price action happily moves on to the mid BB which

is against us and we set TP1 at that point. We smile as
the price action (as expected) moves on to touch the
opposite BB and here we set TP2 and close the trade for 2 profits!!
The second trade is outlined in full......... Our extreme candle goes right thro the mid BB!! What do we do now?
Well, we have 2 answers - firstly we cut the candle body in half and that becomes our entry point. Secondly, in some cases it is
simply not worth entering at all when we see this scenario. You be the judge!!
After the entry, we watch the price action retrace a small amount then touch the mid BB where we have set TP1. We are ERR ON
THE SIDE OF CAUTION when we see level mid BB and set TP1 at the mid BB.
We collect a TP1 and set the stop loss to break even. Now we see retraces in the next 2 candles. We do not know the order of the
price action in the following candles unless we went to a much lower timeframe. So if the candle retraced after the break even

was set, then we have only TP1. If the candle retraced before the break even was set, then we have TP1 and TP2. Either way we
have a profit.
The purpose of this post is to show you how to enter when the entry candle is very long - passing thro the mid BB. If the
entry candle is very long and does not pass thro the mid BB, you may choose to cut it in half anyway. The idea is to get a
decent entry point and avoid any major retracements after the entry.
TQ- The "extreme" candle is a larger down candle that penetrates the lower BB? I'm assuming that it must penetrate the BB. If
the price does not trade higher than the modified cbl entry line...we have no entry, but would continue to follow the downward
price action looking for another cbl signal?
TA- Yes. If we get a lower candle still, we operate on the lowest candle, just like in the original CBL. It can happen sometimes
that you get a premature entry with this modified version, but no real damage is done in such a case.
Lets now look at some schematic charts showing the 4 price action types. Note - the modified CBL is not the subject of these
charts. These charts are to get you familiar with the trade types with the 4 price actions. Here we go
All 4 price action types are shown in this chart. In each case, the TP1 was set at the mid BB.
Entry 1 (OM - green), goes only as far as the mid BB. We

get TP1.
TP2 is hoped for but the price action retraces back to point 2.
(RO - red).
Entry 2 (OM - green) does exactly the same thing. (TP1

profit).
After that the price action (RO - red) carries on like a two bob
watch and finally rests at point 3.
Entry 3 (OO - pink), manages to pass the mid BB and close

at point 4. We get TP1 and TP2.
Entry 4, a short entry, (OO - pink), does exactly the same

thing. (TP1 + TP2).
Entry 5 is another OM - green. (TP1 only).
Entry 6 is a nice OO - pink trade. (TP1 + TP2)
Entry 7 is another OM - green. (TP1 only).

The untradeable RO - red retraces back to point 8.
Entry 8 is a OBB - blue trade. The price action goes on to walk the lower BB band. We get TP1 and TP2.
Here we have 8 trades in all. They are carefully managed according to our DNA rules.
We have 4 complete TP1 + TP2 profits. We have 4 TP1 profits only.
We have ZERO losses!!

TQ- You showed us the example on a 20min chart GTF. How about keeping the original system with the 3 candles CBL but
switch the chart to 5minutes? Now we switch to M5, use the 3 CBL approach and enter. Once entered just switch back to
M20/M15 and exit on the BB.
TA- I can see your strategy in using the CBL in the 5 minute chart to affect a better entry than say, the 20 minute chart. The
problem with this is that you may get an unwanted entry in the 5 minute chart. The 5 minute chart says enter and shows where to
enter, but the 15/20 minute chart shows no such entry and price retrace instead.
In such cases you make one whopping great loss!! If too frequent, you end up with a very poor win/loss ratio. This danger also
exist with the naked traders using SR lines. Going down to the short timeframes means they could suddenly find their entries
being short circuited!!
I think it is better to keep everything on one chart if at all possible. And it is possible with this Bollinger DNA method.
However, feel free to go it alone and develop your approach if you wish. I will wish you well all the way!!
TQ- You might want to use the fib tool to gauge any closes below the 38.2% retracement line, as shown: The third retracement
candle closes below the 38.2% retracement line - I take it that this would be a valid reason to close this trade? Any thoughts by
anyone else?
TA- Yes, this is a valid reason to close. We could also consider the principle that a trade is not finished until either the stop loss
or the Take Profit is hit.
In that case, the price action gives the stop loss a close shave but does not hit it. If you took this approach, then you would win not
only TP1, but TP2 as well.
On the other hand, you will also lose more pips when you do indeed hit the stop loss. Its a case of "what you lose on the swings
you win on the roundabouts." Whichever approach you take, it must be consistently applied.
Maybe doing without the Fibonacci at these potential loss retracements is better. Maybe we should stick with Fibonacci
only when we are in a winning trade and use it in retracements to determine whether to continue the profit run. I am
limited in this area because I do not have the ability to back test.
TQ- Would another definition of an "extreme candle" be the lowest extreme candle on a down move or the highest extreme candle
on an up move before the price action moves inside the BB?
TA- NO!! The highest/lowest extreme candle on a BB bubble is OK. But in a BB sausage, price action can move inside the BB
after a high/low candle several times before the sausage finally ends. Finding the highest/lowest candle on a BB sausage is easily
the most difficult part of this method.
I intend to research this a little more to fine tune this, but I have already done quite extensive research to this end. Price action
can do anything - and this keeps us on our toes!! Changing timeframes does not seem to help in this dilemma.
One fact here is certain - not to act until the opposite BB starts to contract. But at this point you still do not know whether the
price action is going to retrace (bubble) or continue walking the BB (sausage).

At this point let’s have another look at a chart to get an overview of how this method works. Note that the CBL entry method is
not included. The idea here is to get a general picture of what we are doing. In this chart I am going to omit all those fancy
colours in the typing. It took ages to do and was very labor intensive. Here is the chart
In all these trades, the TP1 was set at the mid BB.
The TP2, if reached, was on the opposite BB. From
trade 1 entry, we go past the mid BB (TP1) and hit
TP2 at point 2. This is an OBB (blue) price action,
and the trick here is to exit at the end of the lower
BB walk.
Trade 2 hits only the mid BB. (OM price action,

TP1 only). The price action does and RO action
(red) in returning to point 3.
Trade 3 is identical to trade 2.
Trade 4 (OO price action, pink) collects TP1 at the

mid BB and TP2 at point 5.
Trade 5 is identical to trade 4, except shorted.

(It looks like there could be another trade between 5
and 6, being an OM trade to the mid BB only).
Trade 6 is identical to trade 4.
Trade 7 is a failed trade!! - we have a loss!!
Trade 8 is an OM trade collecting TP1 only. The price action retraces to point 9. (RO price action - red. This is not traded).
Not including the bit in the brackets, we have.......
4 cases of TP1 + TP2. That is, 4 large profits + 7 small profits + 2 losses.
3 cases of TP1 only. The 2 losses are approximately = 2 small profits so in total we have.......
1 loss. (2 contracts) Grand Total = 4 large profits + 5 small profits.
So you can see that we have a very high win/loss ratio!!
TQ- At the point where TP 2 was first touched there was no contraction of the opposite BB................ Shortly after that the price
action continued to go down...starting a new trend down (a bubble). Remember, Tymen cautioned about entering before a
contraction started. Contraction is a key signal factor.
TA- This answer to PardyS is absolutely correct. At this point I have not yet gone into detail about entries. The OBB needs
special treatment on its own. Solving the matter of the BB walks and getting the correct CBL entries are the 2 most significant
matters still to be treated. Then our method is bullet proof!!
TQ- Quick question on this one: Since the candle before your extreme candle was NOT bigger you should have included it into
your drawing of the CBL, right? Am i wrong here?
TA- Yes that is correct. I am trying to see if I can make an improvement to the modified CBL. The idea is to get as many pips as
possible while still keeping you out of retracements. At present the modified CBL is being coordinate with the BB contractions.

TQ- Hi, Just wanted to clarify trade 2 in my mind. The extreme candle itself has crossed the mid bb. We then cut it in half - price
at the moment is above the tp1 point of the mid bb. So, essentially we will enter if price retraces below the marked blue entry
line, and then crosses it upwards. Please correct me if my understanding is wrong.
TA- The cutting of long candles in half is to reduce them to the same operation as 2 normal candles. It is done for want of an
entry point. We cannot work with those very long candles that go past the mid BB. Because we have such a long candle, price is
naturally expected to retrace. In retracing, it will hit the new entry line (blue line). Whether it hits that line from above or below
is irrelevant. We just enter.
TQ- I think there's one potential loss on the chart that you missed: However, there's also a beautiful winner right before the
squeeze, so it evens out.
TA- Again, this potential loss is given before the opposite BB contraction. In this case, the BB walk constitutes an OBB trade.
This trade would not be closed for a TP2 profit until at least we saw the BB contraction. As such, the loss shown on the chart
would not occur and the price action at that point would be ignored.
The closure of the trade then occurs when the price action hits the BB after the contraction of the opposite BB. Hope this helps.
TQ- I been looking at the BB bubbles and sausages to try and define a characteristic that puts it in one of these categories after a
BB walk. Not sure if Tymen has mentioned this specifically (I read the whole thread but I forget things too!), I think a bubble
starts when both upper and lower bands have turned in very close in time to each other. However in a BB sausage, there is a
longer period of time before both BBs have turned in, the opposite extreme BB will turn 1st and then the BB that is being walked
will turn in a bit later. The time between these 2 turns seems to determine whether it's a bubble or sausage. Am I correct in this
observation?
TA- You could very well be. Phillippe Cahen in his book "Dynamic Technical Analysis" makes reference to these points. I will
see if I can dig it up!! When the opposite BB starts to contract, you can never tell whether you are going to have a bubble or
sausage. Price action can do anything - and it does!! If the price action retraces and goes in from that point - bubble. If the
price action retraces and then restarts the BB walk - sausage. In that sense, you have to wait and see!!

Here is a very interesting chart to learn from.
The price action at point 1 clearly goes thro to point 2. This
was an OO price action type. (pink). With the mid BB against
us, the TP1 is set at the mid BB. We smile as the price action
goes thro the mid BB to hit the upper BB at TP2.
Then we get an OM price action (green) and a TP1 trade

starting from point 2. After this, the price action fails to hit the
lower BB for TP2 and retraces instead to the upper BB where
it goes for a long BB walk.
This walk is in a BB sausage. The trick is to find where this

walk ends. It ends at point 4.
We then enter at point 5 with the mid BB against us, thus

setting TP1 at the mid BB. The price action goes thro the mid
BB (collect TP1) and reaches point 6 (TP2). This is an OO
price action type (pink).
TQ- Hi all, tested again today. Mainly wins, but also some lost trades. Here are 2 examples:
Question on the lost trade: Did i made a mistake or is this just one of those trades you just loose? Would you have taken this
trade tymen? (or well: question goes out to all) Oh yes and of course i missed the CBL-entry-signal right after i lost that one :P I
feel the impact of those losses is high, since you get a full 2-contract-punch in the face ^-^

TA- No I would not have taken that trade!! Have another look at that BB bubble. You were dealing with a very minor BB walk.
Now look where you entered. Is it in the area of BB expansion or contraction? I think that answers your question fully!! I would
have taken the 2nd entry opportunity because the 2nd one is in the area of contraction.
TQ- I feel the impact of those losses is high, since you get a full 2-contract-punch in the face
TA- You did ask for it thru your mistake!! But losses are losses - you have to live with them. Trust you did this on a demo.
However, your previous win was greater than your loss.
On the good side of your post - I just love your graphics and setting out!! Do that every time and you will have my
attention always!!
TQ- I think to make sure of the BB band contraction, look to the extreme band being walked to turn in as well as the opposite
one…
TA- Sorry, I cannot agree with this. Have a look at this traditional chart >>>
Notice the complete discrepancy between the BB contraction

points. There is no looking here to see if both BB contract at the
same time.
It is a fact that all BB bubbles are basically asymetrical.

Scroll thru any chart on any timeframe and you will see that
what I say here is true. However, there are other methods of
ascertaining the exact entry and exit points. Because I have only
just explained the method, I have not yet gone thro all of this
yet. The pressure of me moving also makes my post somewhat
disjointed. But we are making progress - that's the good thing!!
Remember this drawing?
What is involved in the Bollinger band shapes? If you can see that,
then you will understand what is essential to the success of this
method.
EXERCISE
Just a test, to see if you are still on the ball. Is this a BB bubble
or sausage?
Give the reason for your answer.

Exercise Answer
User Input
Its a bubble ,when the opposite bb contracts the PA refuse to walk on the BB
I would answer the same thing.

- The opposite BB contracts
- the PriceAction is leaving the BB and its not going back to touch it. (refuses to walk the BB)
User Input
Man, i hope its not a sausage for some reason, then i understood
something wrong i think. :-/
I still have a big problem to see if i'm dealing with a bubble or a

sausage when its still "under construction". Take a look:
This is obviously a sausage.
Now when its still under construction its often like this:
Ha Ha Ha!! Well done, NForex!! You are clearly the King of
Graphics on this thread at the moment!!

User Input (Graviton) Excellent graphics NForex. You made me chuckle. Let's see what we can get from this: In the first pic on
the left, the bbs are a little rough, not pretty and smooth as we often see in a bubble. We will get a very few rough edged bb
bubbles, but it's a clue.
The best indication though is the OBB price action. PA goes all the way from the top band to the bottom, then proceeds to walk
down the bottom band 5 or 6 candles. Bubbles rarely have OBB PA that walks 5 or more candles down down the opposite bb.
Usually when that happens, it's a sausage. Another clue.
Note that after PA touches the bottom bb, most of the PA is below and outside the bb. By definition, the bbs should contain most
of the PA most of the time. This is acting in an unusual fashion, by definition. Bubbles are pretty and smooth and usual and
predictable. Sausages are rough and unusual and difficult to predict. This isn't acting like a good smooth pretty bubble. It's PA isn't
contained as it should be. Another clue.
The second and third pics are fake outs. In the second pic, the opposite bb contracts as PA pulls away from the lower bb. That
meets one criterion of a bubble. But that can also happen very many times in a sausage, so if you were still short here you'd
probably want to TP2 and wait it out, looking at the doji candles and long wicks in TP2. This seems like conflicting information,
but it's really not since all info could possibly be consistent with a sausage, but all info is not consistent with a bubble. Don't be
faked out by a single contraction and bb bounce of a sausage. Since a sausage will usually have many of those, it means nothing
by itself. We need to look deeper. More importantly, we need to balance having the courage of our convictions vs. keeping an
open mind and considering the opposite case. Well, we've considered the opposite case, but do we have the courage of our
convictions?
The temptation is always to over trade. The greater temptation, and the cause of missing many huge follow-on profits, is all of us
have a "one bird in the hand is worth two in the bush" mentality hard wired into our brains. It's an evolved survival strategy that
served the cavemen well for millions of years, but it will kill your trading profits. Work on erasing that mindset and process data
like Mr. Spook on Star Trek. Just look at the cool clear logic of the situation. Don't over trade. Don feel you just "have to do
something". Most of your profits will be made doing nothing, or letting your profits run. Most of your losses will be avoided by
doing nothing, or not entering a questionable trade. There is only one situation where you need to act fast and decisively and that
is when you are cutting your losses short. When a trade isn't following the story you have laid out in your head for it, and you
incur your first loss in it, then there is no room for hope. Abandon all hope ye who enter here into the Forex market. Cut your
losses fast and look for a trade that goes with your plan. But in the cool logic of trading, this one is still working, you have profit,
so the rule is, let your profits run.
The third pic looks bubbly, but we have already convinced ourselves that PA is more sausage like. There is a Tymen system entry,
but should we take it? Look at the long pin top on the last green candle in the third pic. It's a seed of doubt. I think Tymen will
have more to say on this, but generally, bubbles turn into sausages, sausages rarely if ever turn into bubbles. So I think if we had
decided in pics 1 & 2 it was a sausage, it was a sausage, it is a sausage, it will remain a sausage, unless it is conclusively prooved
otherwise. I wouldn't consider pic 3 conclusive proof, so it's still a sausage. Pic 4 just confirms that. Once a sausage, always a
sausage. But bubbles can be turned.
Of course, if you had traded the whole sequence per Tymen's method, you would have made major pips on the OBB PA in the
first pic. And even if you didn't recognize it's unbubbly behavior and exited early, which now I hope you see would clearly be a
mistake, and took the entry in the third pic, you would have a small stop out. So in the end you would be even or a little ahead.
Tymen's system is very forgiving, but you must think like a trader, not a caveman, to make the most of it.
So there are three good reasons to trade this as a sausage and stay in the trade to ride it to even more profits:
One, to do so, you don't have to risk any of your trading capital, only profit. Get ready, here comes a HUGE realization. Even
though profits and trading capital look the same, they are WAY different. You can never blow out an account risking a part of
your profit, no matter how many bad decisions about doing that you make. You CAN blow out an account risking your trading

capital if you make enough bad decisions. This difference is HUGE!!! Think about it, and then think about it some more. Trading
profits and trading capital are NOT the same. They should be treated differently.
Two, if you thought this was a sausage, then it will always be a sausage. It won't change back to a bubble later. After you have
considered the opposite case completely, which you should always do, have the courage of your convictions.
Three, the trade has already moved a long way in your favor with much PA outside the lower bb. A short pull back is now
expected, so this trade is really following a very logical sequence, one that you can plan for, rehearse in your head so it isn't
frightening. Don't be afraid. Don't be greedy. Fear and greed are the profit killers. Be cool, calm and logical and let this trade come
to you.
That's my analysis of your graphic. Take what you like and toss the rest.
ANSWER TO EXERCISE
Sorry to say, that most of you are incorrect - it is a sausage!! Well, as a consolation, it does have some features of a bubble.
How on earth did I come to that conclusion? The rule is simply this, and I have stated it several times on this thread.........
A BB bubble - when the opposite BB contracts, the price action retraces and does not again reach the high it was at when
still in contact with the BB.
A BB sausage - when the opposite BB

contracts, the price action partially
retraces but then regains its momentum
and rises above the point where the
candles were still in contact with the
BB.
The price action given by the green

arrow is typical of the direction taken by
a BB bubble.
The end price at point P has not only
made its way to the opposite BB, but
also the price at point P is a very clear
retracement from the price at point A.
In this chart you can see that there is no
retracement from point A. The price at point B is a further advancement of the trend started earlier at the mid BB. This trend
passes thro point A and goes on to point B.
Now it is true that the price action detached from the lower BB. But that is secondary to the definition!! The detachment
without a return to the lower BB is the only feature in common with a BB bubble, but does not define it as a bubble. The timing
of this exercise was very deliberate!!
I could see the problems with the interpretations of the price action in your posts, so I thought about a method of discerning what
you were all thinking and I hence came up with the idea of an exercise. It had to be a good one so I carefully selected the one
given above. That fact that most of you have answered the exercise incorrectly may be the reason why many of you are
having problems setting up your trades.
If the above chart were traded, the entry would have gone into retracement, and, therefore, a loss would have been generated.
because the stop loss at point A would have been exceeded at point B. This kind of case tends to be more rare. We need to set up
some entry rules so that we can discern between an entry for a BB bubble and entry for a BB sausage.

Here is another example of a BB sausage
At first, the retracement from point A to point B gives the

impression that we have a BB bubble. But when the price
action rises to point C, we reclassify our pattern as a BB
sausage.
CBL Rules
I am now going to set the CBL rules.
Figure 8
But before I do so lets look again at the 4 price action types (yes, I
am a typical school teacher - always revising!! )
Figure 8, the OO (outer to outer) price action
Figure 9, the OBB (outer to BB walk) price action
Figure 10, the OM (outer to mid BB) price action
Figure 11, the RO (retracement to outer, untradeable) price action
Figure 10
Figure 9

So 3 out of the 4 price action types will generate a profit. The
OBB will generate the greatest profits. These price action types
come from entering a level BB, then seeing it develop into a BB
Figure 11
bubble or BB sausage.
Both of these patterns allow a BB walk. The BB sausage allows the

greatest BB walk and therefore, such trade will generate the greatest
profits.
The least profit gainer is the OM price action type where the price
action goes only to the mid BB before retracing. The retracement,
if continued becomes useless to us and is, therefore, the 4th RO type
of price action. Now that I have revised this, lets look at the CBL in detail.
The Count Back Line rules......

After some investigation I have concluded that one candle for our CBL is all that we need!! Surprise!! The retracements after
the entry do not seem so fierce that we need a heap of candles to draw an entry line from.
But added to this are 2 logical rules to set the entries.
These 2 entry rules allow us to enter a BB bubble at the right time as well as allowing us to enter a BB sausage at the right time (a
big ask!!). This 1st rule you already know, because I have mentioned it before.
1) We do not enter on the CBL until there is a close either:

• above it when trading long.
• below it when trading short
If you think about it, the close is closer to the mid BB than the CBL entry is the reason for this rule is that with the close going
thro the CBL entry, we are trading with the momentum of the price action. Darryl Guppy says that the price close is set by the
"smart money" whereas the temporary highs/lows (the candle wicks) are set by more extremist traders. Next post is a schematic
diagram of CBL rule 1.
This schematic diagram shows both the long and short cases >>>
In the diagrams, the extreme candle is number 2.

From here we draw the CBL.
Candle 3 does not qualify for anything.
Candle 4 is intersected in the wick - not good

enough.
Candle 5 is intersected after the close has

gone thro - this is our signal to enter.
We enter at the open of candle 6 (not shown).
The second rule appears to be very illogical

until you think about it.

2) After the CBL, the entry signal candle must have a body that is smaller than the body of the extreme candle.
What!!? This is a ridiculous rule!! NO, not really. Its logic is not obvious. Remember, we are trying to get entries at the very
end of a BB bubble or BB sausage. When the price action is following a BB walk, the price really breaks out - and jumps by large
leaps. The candles are long, tending to be dominant candles.
But when you come near the top/bottom of such a BB walk, the price action becomes much more undecided, resulting in frequent
doji candles. That is why many a trend top is signaled with an evening star - the small doji or "star" candle is at the very top. So
that is our logic here.
This schematic diagram shows both the entry rules in action (both long and short cases)
As before, candle number 5 has the

close intersecting the CBL. But the
candle 5 body is bigger than the body
of extreme candle number 2. It is,
therefore, rejected.
Candle 6 meets both requirements.

Its close intersects the CBL.
(rule 1). The candle body is smaller
than the body of the extreme candle 2.
(rule 2).
The entry candle would now be the

open of candle 7 (not shown.)
There are 2 other functions we must take into account when setting up a CBL.
1) Entries - when dealing with a suspected BB bubble or sausage, we do not enter until the opposite BB has contracted.
2) The extreme candle can be found anytime but is not considered valid until there is a candle that breaks thro the outer BB.
Up until this moment, no extreme candle is considered to be valid.
Now that we have the rules, let’s consider some real cases!! I will use some
symbols to show the correct entry candle.......
These symbols will make labeling of the charts easier because there is limited
space to write on the charts.
OK, now for a real life example
In this BB bubble, you can either enter at point A and

desire to exit somewhere near point B. Or you can
enter somewhere near point B and exit at point C
(mid BB). (This trade does not go thro to TP2).
So how do we do this?? A stochastic? A parabolic

sar? A starc band? Nah!!
We use the CBL method!! Next post shows how it

works.

CBL Method In Detail
Here we have our CBL method in detail
Explanation
Candle 1 is our 1st qualifier to find an extreme candle

because it goes thro the outer BB.
Candle 2 is more extreme than candle 1.
Candle 3 is the most extreme of that series - a CBL is set.
Candle 4 has its close lower than the CBL (rule 1).
Candle 5 has its close lower than the CBL (rule 1) plus its
body is smaller than candle 3. However, none of the
above qualifies because we have not yet seen an
opposite BB contraction!!
Candle 6 is the most extreme candle of the series - a CBL is set.
Candle 7, 8 and 10 have their close lower than the CBL (rule 1).
Candle 11 has its close lower than the CBL (rule 1) plus its body is smaller than extreme candle 6.
(The body is smaller being a doji). We have passed the opposite BB contraction
The red candle following the doji becomes our entry candle. It is marked E. So this gives us a great close if you were
trading from the beginning from point A and gives us a good entry if you were going to trade from point B.
Look now at another trade, the BB sausage from A to B.

Or you could consider an entry somewhere near B and
go thro to C. Both are OBB price action type trades
giving you the most possible pips.

The CBL in detail
Explanation
Candle 1 is our 1st qualifier to find an extreme candle because it

goes thro the outer BB.
Candle 2, 3 and 4 are more extreme candles that qualify for the
opposite BB contraction, but their CBL go nowhere - rule 1 is not
obeyed anyway.
Candle 5 is no better.
Its CBL is lower than before - you NEVER lower the CBL.
Candle 6 is the most extreme candle of the series - a CBL is set.
Candle 7 has its close lower than the CBL (rule 1).
Candle 8 has its close lower than the CBL (rule 1) plus its body is
smaller than candle 6. We have passed the opposite BB contraction.
Candle 9 becomes the entry candle at the open.
Lets have a look at another case, this time in another currency pair
Explanation
Candle 1 is our 1st qualifier to find an extreme candle because it goes

thro the outer BB.
Candle 2, 3 and 4 are more extreme candles that qualify for the
opposite BB contraction, but their CBL go nowhere - rule 1 is not
obeyed anyway.
Candle 5 is the first extreme candle that gives rise to a useful CBL.
Candle 6 has its close lower than the CBL (rule 1) plus its body is
smaller than candle 5 We have passed the opposite BB contraction
Candle 7 becomes the entry candle at the open.
OK, one more post on this CBL entry method, then a much needed
break from all this very tiring work of posting.

Remember this BB
sausage?
Boy, what a banger!!

Lets try and work out
and exit for that one!!
Here is the CBL logic for that long BB banger!!
Explanation
The candles at 1 do not pass thro the BB and do not start a

qualifier.
Candle 2 is a suitable extreme candle and its following candle

(blue), passes rule 1 but its body is larger than candle 2 (fails
rule 2).

rule 2).

rule 2). Nothing can get smaller than a rickshaw man doji.
Candle 5 is a suitable extreme candle.
Candle 6 is more extreme than candle 5 but its CBL extension is lower than that of candle 5 - we NEVER lower the CBL and so
the CBL extension of candle 5 holds true.
The doji after candle 6 has its close lower than the CBL (rule 1) plus its body is smaller than candle 5 (of course!!). The entry
candle is the yellow candle after the doji. It is marked E.
It is an excellent exit point if you traded the OBB along the BB sausage and is an excellent entry point for trading short to
the mid BB from here on. I did say that this method was not for beginners!! You were warned.
Because this method is so finely tuned, it is only best for high lots. It may, therefore, not be suitable for everyone. However, I
fear that we may be setting out on an origami exercise rather than a trading exercise.

THE ENTRY RULES
1) The CBL consists of one candle only. The entry line is drawn off the high/low.
2) Our CBL search starts when we find a candle that passes thro the BB - an "extreme" candle. After
that any extreme candle is good. It does not necessarily have to pass thro the BB.
3) Our "entry candle" search starts when the opposite BB contracts. Before this point, no candle
can qualify as an entry. This is done to protect against possible retracements.
4) As more extreme candles appear, we set a new CBL. But .....
a. In a long trade - we NEVER raise our CBL.
b. In a short trade - we NEVER lower our CBL.
5) An entry is finally made when:
a. a candle close passes thro the CBL, and
b. that same candle has a smaller body than the extreme candle.
FINAL NOTE
These rules apply for BB bubble and BB sausages. When there is a level/near level case, or a
squeeze area we only need the CBL. We have no need of the 2 special rules - close and smaller
candle requirements.
An oversize extreme candle is one which passes thro the mid BB. If such a candle appears in the
level/squeeze case, it is cut in half to effect a practical CBL entry.
TQ-
ok, I took first chart under my hand. Its 30 min eur/gbp Candle #1 doesn’t qualify its before opposite BB contraction. Candle # 9
is go no where Candle # 2 is qualified to be extreme candle. Candle #11 has close below candle #2 and its body smaller. Candle
# 11 is qualified for entry. Candle # 14 is qualified for Exit of trade #1 as the body is smaller and close is above extreme candle.

s everything correct?
The logic of your analysis is quite wrong here and I will explain why in detail. Firstly, and most importantly, the candles you
refer to are not in a BB bubble or a BB sausage. Instead, it is a BB squeeze area as per my rules in post #2374, page 238.
Candle #1 doesn’t qualify its before opposite BB contraction. This rule does not apply here - no BB bubble or a BB
sausage.
Candle # 9 is go no where From candle 9 you could do a quick OO trade to the lower BB.
Candle # 2 is qualified to be extreme candle.
It is indeed an extreme candle and from here you would do a trade into the mid BB for a TP1 profit at candle 5. (The price action
retraces to candle 9 – no TP2)
Candle #11 has close below candle #2 and its body smaller. Candle # 11 is qualified for entry.
Irrelevant in this case because of the above squeeze rules.
Candle # 14 is qualified for Exit of trade #1 as the body is smaller and close is above extreme candle.This is irrelevant
also.
The correct way to trade this whole senario is this………… First, we discern that we are trading in a squeeze area and
not in a BB bubble or sausage. Therefore, level BB rules apply. See rules, post #2374 page 238.
We note extreme candle 2, enter at 3, exit at 5 for TP1. No TP2 – break even instead. Candle 9 is again extreme, enter candle 10,
exit 1st contract at candle 10 for TP1, go on to the lower BB and exit 2nd contract for TP2. END OF TRADE.
To enter at the lower BB and exit at candle 12 makes no sense.
In this system the very first principle of operation is that we seek to enter at one of the outer BB and trade thro to the
other outer BB. That’s how this method works.
In your case, you are entering at the lower BB and exiting candle 12 at the lower BB, thus contradicting the operation of the
method. In summary, I again warn you RenaLa, that this method is not for beginners. If you lose your money in live
trading with this method, then don’t blame me – I have warned you beforehand!!
This Bollinger DNA Method is designed to work with high lots. It does so because the win/loss ratio is very high, the
drawdowns are low, but the risk/reward ratio is often very small, even <1.
I am thinking that most traders here cannot afford to trade such high lots. Let me paint a picture for you……..
We are going to build a powerful car racing engine. It will only be used for a short time but it must be able to power a light
weight dragster thro a 1km stretch and travel faster than a jet plane taking off at the end of the race. So what do we do?
We take a V8 engine block, x-ray it to check for casting flaws. Then we fill the water cooling jackets with concrete – we do not
need the cooling for the short stretch. The block is then fitted with domed pistons, fitted to a high strength roller crankshaft to
increase top revs. The crankshaft bearing housing is reinforced.
The engine head is shaved to the max, then polished and ported with large size valves and double springs to prevent valve bounce
at high revs. An overhead titanium camshaft chain is standard. The camshaft itself is machined in such a way that the timing is as
advanced as the engine will tolerate and still run.

When assembled the engine is fitted with a supercharger to force the air/fuel mixture in. The fuel is not petrol either – it is nitrous
oxide, something far more potent than petrol. Finally we finish with just enough exhaust pipe to keep the noise just below
deafening. The exhaust is of course, tuned extraction.
When running, this engine crackles like a fireworks display in full swing. And power – wow!!. 1200 or more brake horsepower!!
We will definitely beat that jet aircraft!!
So what am I saying here? Well, this trading method we are looking at is like that hotted up engine.
It is super high performance, high win/loss, so much so that the risk/reward is very low indeed at times. Our trading method
consumes high octane fuel – large lots. Using just a minilot would give very poor performance. Our trading method is
designed to give very high output in a very short time.
Now is this what we want? We could switch to a diesel engine. This engine is low power, but try to stop it. They are
unstoppable when they are running. Hence they are used in heavy duty work machines such as bulldozers, locomotives and large
trucks.
A 4wd vehicle with a high powered petrol engine will race up a tall sand dune, no problems. The same vehicle with a diesel will
get bogged just after starting off. But now we are on a steep rocky hill and we need to tow a series of broken down vehicles up
this steep hill. The diesel 4wd will do that all day and very successfully. The petrol 4wd will overheat after just two attempts.
In another example, imagine a tug of war, if possible, with a large jet airliner chained to a locomotive. The high powered jet
engines will roar, but the diesel locomotive with 3 V8 diesel engines will easily tow the airliner backwards and win the tug of
war!! Its horses for courses.
The diesel engine is like a forex trading system that has an average win/loss ratio but a much better than average risk/reward ratio.
It has pulling power – the pips are “pulled in” but the performance rating is not so great. This trading system will pull pips in all
day, but at an average pace. We have already started to look at such a method – using SR lines and a Fibonacci retracement
method to increase our gains. The SR lines were not so good, but what if we switched to using the Bollinger bands as SR lines?
What I am asking is this.............
Are you finding this trading method too complicated? Too difficult to learn and/or implement?
Would you prefer if we retreated back to our original idea of macro trading with the 3 line CBL and the Fibonacci ratios. We
would use the Bollinger Bands as a replacement for the SR line.
By using a higher timeframe and knowledge gained from this DNA system, we could cut out a lot of the losing trades and develop
a reasonable win/loss ratio. The risk/reward ratio is already good as proven by the Fibonacci retracement approach.
Now, I am happy to continue with the Bollinger DNA method if you like. But if you prefer a retreat to macro trading using the
BB, a 3 line CBL and Fibonacci, then I am happy to switch over. The job of a teacher is to be flexible.
So, think about it, and I would like to know everyone's thoughts on the matter. Please let me know - I can continue with
your preferred direction after I have moved and return to this forum.

I am now going to list what I see as good potential trades and bad
potential trades. Here are the good ones >>>
Level BB trades or squeeze BB trades.

However, be aware that these may produce few
pips unless you are in a higher timeframe such
as 4 hour upwards. More good trades >>>
These are OBB trades starting from the

level/squeeze area to the left, then going on to a
breakout in either a BB bubble or sausage
format.
TP1 is set at either the mid BB if the mid BB is

against us or the first touch of the BB if the
mid BB is for us.
TP2 is set at the first BB disconnected candle

in the bubble and at your discretion in the
sausage.

Bad trades (for now) !! In both these cases, one a BB bubble, the other a BB sausage, the trades shown have very little room to
move to generate a TP1.
Sometimes TP1 is a loss.
We are then forced to depend on TP2 to give

us a profit and we cannot guarantee that TP2
will be reached.
Further, although the entry CBL on the BB

bubble is reasonably easy to draw, the same
CBL on the BB sausage may well be the
wrong one with price action just ignoring the
Figure 13 direction change.
In the sausage case, we would sustain losses

and these would mitigate against any future
profits!!
The safest cases here is to trade on higher

timeframes - at least with the bubble you
have some kind of chance to get TP1.
I am going to do more research on this trade

type. At present, the best way that I see to
discern the turn-around point is to use a
higher timeframe (x4 approx).
Figure 12
TQ- I hadn't thought about the slope of the mid line. Good to have your experience here with us.
TA- The slope of the mid BB is critical to determine whether the price action is going to cause a
trade to succeed or fail.
Just as I thought, the price action has reversed back to the
mid BB >>>
This just goes to show how critical that mid BB is.

However, the trade is not finished yet, so we will see.

User Input (Graviton)
Greetings Tymen, I've been having very good results with the BB DNA in demo so today I decided to try to fold it into my usual
method of multiple TF trend following and money management. The results have been astounding. Took the squeeze and down
move from EURUSD for over 100+ pips and took a bubble down on GPBUSD FOR ANOTHER 100+ PIPS. Using multiple TFs
with the lower to minimize entry SL risk and moving up to the higher to ride profits to the moon is working well for me. Just
wanted to check in and give my two cents to complaints about trading against the trend. There are multiple trends at any one time
in different time frames. What looks like trading against the trend in a lower TF can actually be a great retracement entry with
low stop loss in a higher time frame. Just my observation. I'm keeping up with posts, but have to make a living also. Thanks for the
great addition to my live trading system. All I can say is, WOW!
OK, glad to hear you are doing well. I could not edit your post - it is too encouraging!! My comment is this.......
You are using more than one timeframe - great!! It appears that you are trading the retreats that I am now counseling against
trading - interesting!!
Your present post is a nice contrast to the complaints from the lesser experienced traders. For this reason I ask you to post such
charts so that these readers can learn what to do correctly and where they are going wrong. When I return, I can analyze
everything and hopefully provide a better way to enter into the retreat trades.
Trade Types
Here I am going to show the trades that......
a) You should take.
b) You should not take.
Bubble Trades You Should/Should Not Take

Figure 14. By all means take the BB walk trade in the GREEN
area.This trade starts with a CBL in a level/squeeze area
beforehand. (see entry rules for level/squeeze areas #2374 page
238).
Do not take the trade in the BLUE area.
Figure 15. By all means take the BB walk trade in the yellow
area.
Do not take the trade in the grey area.
Figure 14
Going back and checking. Yes, the 5M mid BB was against me on

entry as Tymen guessed, but the higher time frame 15M, 30M &
Figure 15
1H mid BB's that I was actually trading were trending well in the
direction of the trade (down). I didn't even check the 5M trend
since it jumps all over. I don't trade the 5M, I just slipped down to
the 5M to get the best entry for a trade I had already decided to do.
I had to wait about one and a half hours for the down BB DNA
entry, but it was well worth the wait. I know, lots of words, no
charts. I'll work on that.
The above trades were BB bubbles,

BB Sausage Trades You Should/Should Not Take
Figure 16. By all means take the BB walk trade in the GREEN
area.
This trade starts with a CBL in a level/squeeze area beforehand.

(see entry rules for level/squeeze areas #2374 page 238). Do not
take the trade in the BLUE area.
Figure 16
Figure 17. By all means take the BB walk trade in the yellow
area.
Do not take the trade in the grey area.
Figure 17

Because I am coming to the end of my time here before I move, I will give an overview........
Some pointers
1) Trade the higher timeframes only - for example, a 5 minute chart is only noise, there is no trend here and you will only
lose.
2) If you think you can handle the retracement areas I said not to trade, then go ahead, but stop if you continue failing. If
your losses are greatest in these areas, then stay out of them and restrict yourself to the OO and OBB price action types.
3) use a "think outside the box" mentality.
4) if you are going live, DO NOT trade undercapitalized.
5) experiment with the 2 CBL methods given - the current one and the earlier one where we used 2 candles and no other
rules. (I personally prefer the earlier rules but I modified then to suit the ongoing complaints).
6) Decide in the end whether this method is going to work for you - be prepared for the low risk/reward ratios.
When I return, I will want to know what the verdict is. I think I know already - lack of trading experience will cause this DNA
method to be a failure for you. (I do not have trouble myself at all).
If I am wrong, then I will post live trades as they happen (on demo account of course). This is the best way for you to learn and I
did this on my candlestick thread, part one. But being pressed for time, I cannot do it now (I have to set my keyboard up to do 2
things at once - edit screen prints and trade at the same time!!). When I am relaxed after moving I can do this!! If I am correct,
then I will start to post the alternative method of macro trading which is relatively simple to understand. It will involve knowing
the major trend (how to discern it from the subtrends), selecting the correct entry points on the Bollinger bands, using the 3 candle
CBL, setting a TP1, then shooting for the moon with a TP2 using Fibonacci.
This macro method can be used with any timeframe because it is governed by the major trend in the high (daily/4h) timeframe. It
does, however, come with an average win/loss ratio, but the complaining readers here will state that the DNA method already has
that too!! For some of you, this macro method will definitely be the way to go. Once we establish which way to go, I will then
construct the PDF which is the final act on this thread.
Here are some real trends!! >>>

Now time to answer this one because I have seen a lot of discussion about it
I have removed all of the lines and

entered the correct ones.
There are 2 trades, both successful.

The first one starts from a level BB,
standard entry, goes to TP1+TP2 -
no problems.
The second one sees an extreme

candle drawn as shown. It looks
like we are entering a BB bubble or
sausage (the bands are expanding),
and there is an opposite (upper)
band contraction at the black line.
The mid BB is going down so we

are careful - any long trade would
most likely finish at TP1, giving an
OM trade.
We set the CBL, the next candle

(green) has its close pass thro the
CBL and is also a trifle smaller
than the extreme candle. We enter
on the open of the next candle as
shown. We are in for a long
profit ride.
If you want your trading to be a success, then you will have to be fluent in discerning the price action. (just like I did here).
That covers everything just now, I think.
Remember, when I return from moving I will post live trades of either the DNA or macro methods, depending on the consensus.
I will take a short break now, then look again shortly to see if we run into further problems and help again.
If you want to be more certain of success.......
Trade in the trend direction of the Daily and 4 hour timeframes.

User Input (Graviton)
Saw your post gezza10 and thought it was good advice. Obviously you have watched the markets a while. I never hold day or
swing trades over the weekend, due to the unlimited opening gap risk. I do hold position trades for months on end, but that is
another subject. Perhaps I'll start a thread on it someday, but first I'll have to learn to post charts! Oh well, we all have our strong
and week areas.
It's now 10:00 AM EST. I've made 12 trades in my live account for the day. After spreads I have , 10 wins for +147 pips, one loss
for -34 pips, and one trade near BE in the hopper that I'm still managing toward the close for the weekend. The loss was a stupid
mistake that I won't go into unless you are interested. I will close my remaining open trade, win or lose before the weekend, but I

suspect it will close BE or for a small profit. Just an average Friday. Since Friday is a short trading day I start closing out my
trades early so I don't get caught having open trades over the weekend.
The following is for new traders having trouble. Senior traders will already know all this stuff.
I see all the pain and frustration of the new traders, trying so hard to make this work. Believe me, I feel your pain with every fiber
of my heart, mind and body. When I first started trading I had close trusted friends tell me I was wasting my time and money. I
was not a very good trader. If I won a trade I felt like superman. If I lost a trade I would get a terrible sick feeling. I won like crazy
on paper trades, but when I started trading real money, it was 6 months before I had one winning week. It was another 3 months
before I had my second winning week. I made every mistake that is possible, some three, four or five times before I learned from
them.
I wish I could save every new trader all that pain and anguish, but I can't. I'm just not the natural teacher that Tymen is. I'm not a
natural trader either. I had to learn everything the hardest possible way. One thing I have learned is when you get to the top of the
mountain, keep climbing. Following this thread is part of my continuing climb, and I have learned things here that I've never seen
or even thought of.
I can't possibly explain Tymen's system better than he can, and probably not as well as some other senior traders in this forum. But
I'm not totally without talent. If I can save even one new trader one moment of the pain I had to go through when I first started,
then perhaps I will have evened the scales a bit. To that end, I'll post a few things to keep in mind while trading Tymen's system.
As always, take what you like and toss the rest.
I'll start with gezza10's advice to watch out for the big gaps on the opening Sunday/Monday. In Forex you have an unlimited
opening gap risk. For instance, suppose you were trading short USDJPY this week and were well ahead and decided to hold over
the weekend. Now suppose, God forbid, North Korea drops a nuke on Seoul, South Korea, what would happen? The pair would
open thousands of pips up. Depending on your capitalization you would take a huge drawdown, or be wiped out. Now you'd think
this kind of event would be very rare, but don't kid yourself. The markets can and will do anything and everything over a long
enough period of time. Protect yourself at all times.
Another thing about gaps is there is an old traders saying. Gaps usually close. I've made good money trading that old saying.
There is good logic behind it relating to order imbalances, but I won't go into it here. If you are interested though, I'll discuss it in
more detail.
There must be 100 or more of these old traders sayings. You need to know them if you are going to be successful. You can learn
them the hard way like I did, or you can find someone to give you a clue. Today, I'm here to give you a clue. Like I said, senior
traders might want to skip this post, as it will all be old hat to them.
Of course, senior traders are welcome to chime in, or correct any mistakes I make, but this post is for new traders who are having
a hard time.
Here's a quick list of old timey traders rules, sayings and folklore you should be familiar with. The list comes with a warning that
in the markets, every rule has an exception, and every exception has an exception. Take what you like and toss the rest. We can
discuss exceptions if you like. These aren't in very good order, but you can order them yourself. Ask any questions you like:
• Always trade with a stop loss. • Stay the course so you are around for the big moves.
• Never move a stop to stay in a trade that's going against • Don't blame the market for your losses. You are the
you. reason for your losses.
• Never average down. • Do not concentrate on just making break even levels
• Always trade with the long term trend. when you are losing.
• Cut losses short, but give your trade room to breathe. • Break even levels do not impact the future success of a
• Let profits run, but if you don't take SOME profit, you position.
won't make any money. • Don't liquidate a winner to keep a loser.
• The first loss is the easiest to take. • Develop and maintain an exit plan. Follow this plan
• Don't trade a dead or thin market. with rigid discipline.
• Be patient. Let the market tell you which way it is • Remember that greed kills.
going to go. • Never add to a losing position. A losing position means
• Never take a flyer. No fooling around. Every pip you were wrong.
counts. • Sustain your patience. Big moves take time to develop.
• Don't trade tired, sick, angry, or depressed. • Remind yourself that there is nothing new in the
• Don't let losers languish or winners turn into losers. markets.
• Minimize risk to capital with in initial tight stops and • Don't predetermine your profits.
small size. • Avoid techniques you don't understand.
• Maximize profits by taking bigger risks only with • Don't be overly curious about the why of a big move.
profits. • The key to wealth in trading is simplicity,
• Consider trading capital sacred, but profits are for • Bulls make money, bears make money, but pigs get
making more profits. slaughtered.
• If a trade goes unusually in your favor, take the risk out • Like I said, if this post bores you, you probably don't
first, then take some winnings off the table. need it, so just skip it.
• Like I said, if you are bored by this, just skip it. There • Establish your trading plan before entering the market.
will be some repetition. • Have a plan for each trade.
• Continuing with old traders sayings: • Develop a worst case exit plan for each trade.
• There will be a few repetitions or just saying the same • Establish entry and exit points and understand risk
thing different ways. • Accept small losses as part of the game if you want to
• Use a system and don't deviate from it. win.
• Use money management at all times. • Stand aside from a position, knowing you have taken a
• reward ratios. position.
• •
Just a few more of these old timers sayings. I really wanted to discuss managing trades, but I realized we'd be on entirely different
planes unless you knew at least some of what senior traders know. They really do trade this way, most of the time.
• Beware the King Kong effect after a big win. • If you don't have time, trade later. The markets aren't
• Most money is made sitting on your hands. going anywhere.
• Never guess what the market will do. This is not a • You probably miss 1,000 good trades a day
guessing game. somewhere. If you worry about missing a good trade,
• Have an open mind. Consider the opposite case. What that's a lot of worry.
is the trader on the other side of your trade thinking? • Take care of your health. You can't trade if you are
• Have the courage of your convictions. dead.
• The correct position size seems too small to be worth • After a big win. Take a break and reward yourself.
the time and effort. • After a big loss, take a break until you are completely
• Concentrate on preserving capital and minimizing risk over it.
and profits will come effortlessly. • Be cautious trading during major news.
• Respect but don't fear the markets. They are more • Always allow enough time to execute your exit plan.
powerful than any individual trader. • Buy low, sell high.
• You aren't as good as you think you are. You are only • Winning traders exit their trades according to a plan.
as good as you really are. They don't wait until their stop is hit.
• Check the economic calender first thing each day. • When a trade is going against you even a little ask
• The trend is your friend. yourself, knowing what you know now would you still
• Look for multiple reasons to enter a trade. have entered this rade? If no, exit immediately.
• Don't trade a thin or dead market. • If you are confused about what the market is doing or
• If you doubt an entry, just wait to see if you were right why it is doing it, sit this one out.
OK, that's out of the way. It wasn't the point of my post, but I needed to get it out there. If I missed any important ones, I hope a
senior trader will pipe up.

There are 3 groups of people on this forum....
1) live traders
2) demo traders
3) lurkers.
Just lurking is an acceptable practice if you do not wish to demo trade.
As far as those NO NO BB bubble + sausage retracement trades go, by all means practice trading them if you think you can
handle it. But too many demo losses and this area should be out of bounds for now.
That leaves us with level/squeeze trades OO and OBB if they go on to walk a BB. It is the OBB price actions that make the most
pips.
I have recently downloaded a program that is a radio control model aircraft simulator. It is a lot of fun learning to fly the aircraft
in real scenery. The computer is amazing in how it shows the plane smashing to bits when you crash. In fact the whole thing is so
real, it is an amazing program.
In the beginning, all you do is crash the plane (you have a choice of planes and scenery!!). This goes on for ages until you get
some control and manage to stay in the air seconds longer before you crash again. I have got to the point now where I can land
the plane in a very rough fashion.
This is just like forex trading. Every time you crash, you are reminded of your forex failings. So close are the parallels that I
found that after some flying, I was able to trade forex with more confidence than before.
For those interested in some motivation to do well in forex, google..... "clearview flight simulator - download." You can have a
lot of fun and with the adrenalin flowing, you will do better at your trades!! Goodnight - back for the last time tomorrow.
User Input (Graviton) An Old Trader’s Perspective for New Traders
Just closed my last trade for today with 10 pips profit. 11 wins, 1 loss today. I'll take it.
My theory is that every single trader is just a little different. So what works well for one may not work as well for another. Some
have full time jobs, families to care for, or school exams coming up. Each must find her or his own path. If your path is to follow
another in theirs, perhaps you are lucky. For most of us, it will take months or years to find our path.
I worked for others for over 20 years, selling my life one hour at a time before I retired and became self employed. After 22 years
of trading, I woke up this morning an hour earlier than usual at 4:30 AM wondering what the London open was. I was so excited
that I couldn't get back to sleep, so I got up, made my coffee and started my daily routine. I settle into a chair so comfortable I'm
embarrassed to say what I paid for it, and fire up the three screens and the best PC I could find. I replace the PC with the best
every year. I get a tax deduction on it.
First I open the economic calender and see what news could ruin my day (or make it). I turn on Bloomberg news and let it play in
the background. Sometimes I turn the sound down and just listen to some nice music. Then I start my pair analysis. Since I have
analyzed the same 10 pairs every morning for years, I have them mostly memorized and really all I have to do is catch up on what
happened while I slept. I start with the longest TF chart, monthly, and look at it in a quick flash. It's pretty well imprinted on my
retina by now. I do the same with the weekly, just a quick flash to refresh my mental image and remind myself of the direction of
the very long term trend. Then the real analysis starts. I go to the daily chart.
Tymen's thread is about trend trading, which is the reason I opened it since I'm a trend trader. So I will stay with that trend theme,
but I'm looking at lots more than just trends. I'm looking at individual candle patterns, multiple candle patterns, trend lines I have
marked over time, Bollinger bands, pivot points, high lows, S/R, major moving averages, and yes, indicators. I have three charts
designed for each pair so I can always have one that is fairly clean with a minimum of junk on it. If other traders are looking at

this stuff, I want to know what they are seeing. If they were looking at astrological signs, I would want to know what they were
seeing. I use just about everything except Elliot waves. I never could make sense of those. This works for me because I have
trained my eye to it. I wouldn't really recommend it as it could lead to analysis paralysis. But I'm mainly looking at two things,
what does today's candle look like, and of course, reminding myself of the daily chart trend. I encourage everyone to make a
careful study of candle formations. But as always, take what you like and leave the rest.
My loss today was a stupid one. I got on the wrong side of USDJPY and didn't get off quickly enough. The good news is I
reversed my position when I realized my mistake and made more on that pair than I lost earlier. I guess I need to re-read my own
rules, eh? I think you can trade for 50 years and still make boneheaded mistakes. Larry Tisch (once owned CBS) was very
successful and built up the multi-billion dollar Lowes Investment Bank from scratch. Near the end of the dot com bubble, he was
sure stocks were overvalued, so he sold S&P 500 short. He was right, but early. The S&P 500 kept climbing to outrageous levels,
far beyond any reasonable evaluations. He thought he was so well capitalized he could ride it out. When he finally gave up on the
trade, he had lost one billion dollars on that one trade. That reminds me of another saying. The market can remain illogical longer
than you can remain solvent. Oh well, water under the bridge now. Let's move on.
So I'm looking at the daily chart in my morning pair review. I always look at my favorite pair first, then work down the line to my
least favorite. I look at today's candle. It tells me a lot. What direction did the market move overnight, did it form a long wick,
how far has it moved, is it forming part of a possible multi-candle formation like a star or engulfing pattern or a head and
shoulders, etc. And of course, I remind myself of the direction and strength of the daily trend. Then I work my way down through
the charts, spending more time on the 4H, since it has formed 2 candles while I slept. I examine each chart and carefully observe
the trend on each chart, 4H, 1H, 30M, 15M, 5M, 1M. The whole process takes 5 to 10 minutes a pair.
When I'm finished with a pair, I have a decision to make. Is the trend clear enough on this pair to trade? Sometimes the decision is
obvious. The trend is clear, the movement is steady and predictable and all I need is a good entry. I make a mental note of what
I'm looking for before I enter and wait and watch until my best entry point occurs. I can go over this analysis and selection process
more if someone is interested, but I want to get to trade management as soon as I can.
So I go through each of my favorite 10 pairs, looking for trend following trades. I'm looking for about 4 or 5 pairs to trade. I can
usually find them, but I'll take what the market gives me, not more than 5, but 1 is OK. If it's zero, I just keep studying. What I
want to do here is diversify my trades. I may lose a little on one pair in a particular day, but if I win in 3 or 4 others, I still have a
good day. Diversification of risk is an important and rarely discussed money management tool. If you can't afford to diversify by
trading multiple pairs, you are trading too large a position for your capitalization. Think that over carefully. We can discuss it
more if anyone wants.
Tymen's BB DNA entries have greatly improved my entries. I'm probably entering with a 5 pip advantage now over the systems I
was using before. With 5 trades, that's at least 25 pips a day in my pocket. Very cool! So I keep putting on small positions, 1/5 th
of a full position, until I have my 5 trades on, or whatever I can find for the day. Of course, each pair has a spread, so I start out
losing 10 to 15 pips and my profit line always starts out negative. But not to worry, my system will have it positive very quickly.
That's because my system is to only take trades where the long term established trend is in my favor. Essentially, I'm taking trade
entries that are short term retracements against a longer term trend. Now you can see why Tymen's BB DNA entries work so well
for me. I've been practicing identifying and trading long term trends for years. Tymen's system identifies the best possible
retracement entries for those long term trends. But there's another trick.
ctually, there are lots of tricks. Tymen advised that if you were going to do live trading, do not trade under-capitalized. If you get
nothing else out of this post, please consider your position sizing. Trading under-capitalized is the greenest of greenhorn mistakes
you can make. Say you have missed meals and lived like a monk to save up enough capital to open an account, please do not
waste your time and money trying to trade under-capitalized. If you have saved $1,000 and think you can trade minis and make a
couple hundred in extra capital each week, please be realistic. That would be 20% a week. Do you have any idea what 20%
compounding per week at 52 weeks turns out to be in annual return? Find a compound interest calculator on-line and figure it out.

The best traders in the world make a small fraction of that, and they have years of experience and resources that are out of this
world.
If you have scraped up your life savings to open a $1,000 account, you should be trading micros. Yes, that's right, 10 cents per pip.
So you think, gee, I busted my buttocks all week to make 200 pips after spread and now all I have to show for it is a lousy $20? Be
reasonable, calculate that return per year when compounded each week for 52 weeks. If you can do a small fraction of that, week
in and week out, with minimal drawdowns, that would rank you among the top traders in the world. Show that record to a hiring
manager at any trading house and you will be hired on the spot. The hire in is about $200,000 base per year, but in 6 months with
a good trading record you can negotiate twice that in commission. And do you know what the top traders in the world make?
About $1,000,000 to $50,000,000. So, if you want to turn $1000 into say, $1,000,000, I can tell you the best way to do that. It can
be done and in a lot smarter ways and a lot shorter time than you think. But don't blow the whole thing trying to get there trading
under-capitalized.
Look at it this way, when I started trading, they didn't have micros. I had to trade mini contracts and odd lots. I wasn't very good at
it. I budgeted myself $500 a week in allowable losses and I was losing it every week. Many weeks I would hit my loss limit before
Friday and just have to quit trading and study and paper trade the rest of the week. I had saved money from working hard for
decades, but I was bleeding cash at a rate I couldn't sustain. I had children still at home (I married late in life). I was scared. I was
studying and trading 80+ hours a week and losing everything. Then I found my path, just before I had to start selling body parts to
put food on the table. You are getting this same education for free, or at a very low cost. Don't screw this up.
OK, I got a bit off track. I was going to tell you some tricks. Sorry.
OK, back to tricks. I've given you one of the best. If you are trading with $1,000 trading capital, diversify your trade into 3 to 5
pairs at 1 micro each. At least until you get the hang of this. The risk is actually much less over the long haul than just trading 3 to
5 micros on one pair. It's a bit more complex, but you'll get the hang of it with practice.
Some other tricks are scaling in and scaling out, which is part trade management, which I finally got to.
The first step in trade management is to enter trades you can manage. Forget scalping the 1M and 5M time frames. Those trades
put you up against the trading desks at Goldman and Citi. They have real time order flow information, multiple live news feeds,
the latest in computers and software, a team of the best traders working together being charged super low spreads. This game is
hard enough, that just makes it impossible.
So you say you can't find enough trades to make any pips on the longer time frames? That's like saying you are driving your car
faster so you can get to your destination before you run out of gas. You need to at least trade the 15 minute charts, 20 or 30 minute
are even better. I've already told you how to find 5 trades a day with pair trend analysis, so let's assume you have gotten up early
right after the London open, I guess that's after work for those down under, and been very patient and waited for 3 to 5 trading
pairs to come to you and took the trades for 1 micros each. Now what? Now you let the market work. Say your average spread is 4
pips, and you took 4 trading pairs, now you are starting out 16 pips negative, but be patient. Some will go positive and some will
go negative. If they go negative more than 10 pips from entry (+4 pips spread, so you have lost 14 pips), close the trade. So say
one of your trades go bad, close it and you have three still running, your account balance has dropped by the 14 pips on the closed
trades, but what's this? The negative profit on the three remaining is turning positive. They will keep turning positive, unless you
made all very very bad choices. If any hit your 14 pip loss limit, on a trade, close it.
Tymen puts two lots on and takes profit from one at TP1 and the rest at TP2. I trade both more conservatively, and more
aggressively. I put one lot on, and when I get about 15 pips ahead, I put a second lot on, when the first is 30 pips up I take it as
profit and put a third on and so on. On the first I took 30 pips profit, the second is now 15 pips up so I can move it's SL to BE, and
the third is risking 14 pips on it's SL. If it goes up another 15 pips, I throw another lot on and ride it for a bit. If it goes bad I grab
up all my pips quickly and finish with about 30 to 80 pips per good trade. In the best trades I'll wind up with five lots on and a
guaranteed profit never risking more than an initial one lot SL.

Some I ride to the moon with a 100 pip move. But that's rare, like once every one or two weeks. But if I'm too aggressive, I can
lose back what I've made. So it takes a bit of practice, but you'd be surprised how quickly you can get the hang of it if you've
traded before. This is more conservative on the front end than Tymen's TP method, because it risks less on the initial SL (one lot
instead of two), it is more aggressive on the back end because it's putting more lots on just when Tymen is taking his profit. The
logic of it depends depends on the fat tail of the markets, or their tendency to trend, or in Tymen's system, you are lots more likely
to see a BB walk when trading with the major trend, than against it. I haven't tested both systems head to head in an honest test, so
I can't say which would work better. It's just the way I learned to trade and it would be hard to change now. A test would be very
difficult because my system is much less mechanical than Tymen's. In reality it probably depends on the individual.
In the end, you have to find your own path, I'm just pointing out a few sign posts. They may not lead to where you want to go.
One thing is for sure, putting the stop just below the extreme candle rather than using my old system of a fixed stop plus spread
saves lots of pips. And using the CBL for entries yields better entries than any other method I've found. It's a bit early to say, but it
looks like his system is making or saving me about 5 pips a trade. That more than offsets the spread. In trading terms, that's
HUGE! But managing good trades is easy and trading three or four good trades at a time you pick it up fast.
The next trick is managing a bad trade , and that starts by only trading with the trend.
Just to clarify, are the retracements you trade with or against the long term/short term trend?
I understand. I only trade with the longer term trend, usually the daily and 4H. The retracement that I'm entering could be on the
15M, 30M or 1H chart. The 15M gives lots of good entries, and I've caught some good long trades off it in the direction of the
major trend. Though for the 15M & 30M,I would also want to see the 1H trending in the same direction of the trade. I never trade
countertrend. But that's just me. I think Tymen has made it very clear he recomends trading with the trend also. He has probably
tested that. Most people seem to be having better results with that also.
Well people......................... I am about to close. My life is pressing in another direction now (moving).
I hope to be back before May 19, but I have given that date, just in case the telephone company and/or ISP are slow at making the
relocation. In the meantime, I give the charge of the thread to Kockneerebel, Master Tang and Graviton. These 3 experienced
traders will not steer anyone wrong.
I strongly recommend the chat room - different sessions to cater for everyone here, considering the different time zones.
From the chat room i recommend that you all do some live trades (on demo)together. You can even risk going live. I hope that
you all learn much and return to me a definite decision on whether the BB DNA method is something that you like. In any case, I
shall also proceed with the macro BB/CBL/Fibonacci trend trading method with makes full use of 2 or more timeframes.
Goodbye for now till I return.T
ymen.

Bollinger Band DNA Chat Room
OK, guys, I had worked on this last week but it looked like it wouldn't be needed, as everyone was happy to use the BP chat
rooms. However, today we discovered that upwards of 30 people into these rooms closes them off to other entrants. So I am
unveiling...
This chat room has no user limit and also features the ability for any user to create sub-rooms for private chats, start a forex blog,
message others outside the chat room, post whiteboard features like charts and screenshots - even upload music to listen to (I got
us started with AC/DCs Rock N Roll Train, which is as good a song for forex trading as any)!
I have to give credit to Shr1k, who was the first to work with me on creating chat rooms and whiteboards for our Forex trading.
The Ning network I've set up for BB DNA is very similar to the one Shr1k set up for another strategy (MMTT).
The network is free to register with and the homepage is here:
Bollinger Band DNA - FOREX Trading using the Tymen Bollinger Band Strategy
The direct link for the chat room (which you can bookmark) is:
Bollinger Band DNA ChatYou can feel free to join us (many are already there) and start your own whiteboards, if you like.
Happy Trading!

Tymen’s Return
Tymen’s return o the thread.
am back!! Ready to teach new stuff. First of all, I wish to know the answer to the question I asked before leaving.........Is the
Bollinger DNA method successful for you? That is, are you getting a very high win/loss ratio? This is a very important
matter, and will determine where I move on from here.
I am also going to deal in depth with the 5 stage entry method developed by Graviton using the GFT platform where the entries
are averaged. I like this entry method (with a few slight modifications). It definitely give a better stop loss execution with the
potential loss of only one contract whereas the 2 contract approach that I have used here (first explained by Boris Schlossberg)
results in a potential loss of 2 contracts.
Now I see that there has been a huge amount of discussion about trends, both on this thread, and Graviton's thread.
We see that as you go thro the time frames, sometimes the trend is up, and sometimes the trend is down. This can be confusing!!
Which timeframe do we use? I have advocated the use of a triptych - 3 timeframes where one timeframe informs another.
Looking at the logic of the trends, and the danger of making a false entry on a short timeframe (where the higher one says you
should stay out), I would like to reduce it to 2 timeframes - one about x4/x6 of the other.
So what I am trying to do is to attempt a simplification of the multiple timeframes approach to as to remove all the confusion.
Diagrams are needed to explain this and that is what I do in the next posts.
No start a close look at the effects of different timeframes and how we should interpret them. I will take an example from the
seaside, since that is where I grew up, and that is what I understand best. We will look at and analogy with the waves of the sea in
3 parts, each representing a higher timeframe.
The 1st timeframe is very short - it is the little waves that travel about 1 metre or so back an forth on the shoreline. They do this
every 15 seconds or so, depending on where you are. The 2nd timeframe is longer - it is the large waves, the largest being every
7th wave. These waves propel the water in large sweeps back and forth upon the beach.
Finally, there is the 3rd timeframe which is very much longer - 6 hours in fact. It is the tide, which is generated by the gravity of
the moon first, and also by the sun. The tide sweeps the water back and forth a very long way.
I will now use these extremes in a diagram in the next post to try to analyze what we are looking at.

Here is my first diagram
The drawing shows a beach and the sea. The

blue strip shows the sweep of the water - the
little waves of about 1 metre in cycle from
lowest to highest (peak to peak). The white
area in the blue strip shows the sweep from
maximum (high water) to minimum (low
water).
Now lets elaborate on this diagram by

introducing the next higher timeframe, the
large waves peaking at the 7th wave >>>
The large waves have a trend of their own,

going up the beach. This trend culminates in
the 7th wave which sweeps highest up the
beach.
However, while these large waves are in

progress, the small 1 metre waves are still
active, going every 15 seconds or so. The
large waves may take several minutes between
them. So each large wave has a lot of little 1
metre waves superimposed on top of it.
The little waves are shown in the diagram by

the white areas in each blue strip. The white
area shows the maximum and minimum height
of these little waves. The blue strips represent
the large waves - there are 7 in this diagram.
The 7th wave sweeps highest up the beach as shown in the diagram.
Therefore, there is a "trend" in the large waves. After the 7th wave, the cycle starts again, the 1st wave being very low. Now if
we were to ENTER on this trend, we would do so at the MINIMUM of the FIRST WAVE. We would exit on the MAXIMUM of
the SEVENTH WAVE.
In doing so, we would be correctly following a trend.
If the time between the 1st and 7th wave is, say 20 minutes, then we would stay in that trend for NO LONGER then 20 minutes.
(if we stayed longer, we would revert back to the 1st wave and destroy our trend).
I will now show the final long trend diagram >>>

Explanation
This diagram appears complex but it is really

very simple. To save space, I have shown
every major wave as a single dark blue line.
The red sections are the little waves
superimposed on the major waves. There are
7 major waves forming a trend of going up the
beach. After that there is a retracement and
the cycle starts again.
Here we see many cycles because the tide is

going out and hence the cycles form a trend of
going out. So...........
The red little waves are the very short

timeframe. (15 second trend) The blue major
waves are the medium timeframe. (20 minute trend) The cycles (tide) is the long timeframe. (6 hour trend).
The blue major waves are showing a trend up the beach (7th wave is highest). This represents going LONG. The blue major
wave cycles (tide) is going out. This represents going SHORT.
Analysis
If you traded the major wave timeframe (20 min), you would be guided by the tide timeframe (6 hour). Then you could enter at
point B or if you are clever, enter at point C. Then as the water goes out, point R becomes a retracement point which is expected
to happen.
You would then exit at either points D or E or any of the waves after that. You would be trading SHORT and you would make a
profit. You would stay in the trend for 6 hours.
Now if you traded the little wave timeframe (15 seconds), you would be guided by the major wave timeframe (20 min). Then you
could enter at point B or if you are clever, enter at point A.
You would then exit at point C. You would be trading LONG and you would make a profit. You would stay in the trend for 20
minutes.
Finally (not recommended), you could trade the little wave timeframe (15 second) and be guided by the tide timeframe (6 hour).
In that case, you could enter at points A or B, stay in the trade for 6 hours and exit at points D or E. You would expect strong
retracements along the way (point R). You would be trading SHORT and make a profit.
From this set of diagrams we can set some rules for trading trends..........
When choosing a home timeframe to trade with, always choose a timeframe 4X-6X greater to tell
you which way to trade. Stay in the trade for a time equal to the length of the higher timeframe.
To do this we are depending upon the axiom - the trend is your friend. We assume that the
probability of the trend reversing during our trade is low.
If, however, upon entering, the trend in the higher timeframe suddenly reverses, we can expect our
stoploss to be hit.
Hopefully, these rules help to remove the confusion when looking at all the timeframes and seeing conflicting trends.
Remember, in theory, there are an infinite number of timeframes!! Now to the task of developing a 5 stage entry method for the
GFT and similar platforms where the entries are averaged.
I am going to do this tomorrow because I am feeling quite sick right now. I have already developed the approach on paper so it
should not be difficult to post it as a method here.
Here are some important points to note for now.......
As regards the Bollinger DNA method, I say to only trade with the trend. DO NOT counter trade the trend.
This means you must wait for a BB squeeze area, then wait for an extreme candle. The CBL entry method I prefer is to use 2
candles (except when the 2nd CBL candle is bigger than the extreme candle - then use only one). I usually enter when the price
action crosses the CBL - I do not wait for a close.
Waiting for the close could result in the price action too close to the mid BB to be of any use. However, if you do prefer waiting
for the close (recommended by Darryl Guppy), then be consistent and do that all the time. Going to a timeframe lower than your
home timeframe to effect an entry is fraught with danger. You may get an entry on the lower timeframe but on your home
timeframe no such entry is indicated. Thus you could end up hitting a stop loss instead.
All of the 4 types of price action - OO, OBB, OM and the untradeable RO, can occur on the BB squeezes. So................ it is
possible for the price action to hit the mid BB only, then retrace. (OM, then RO). Or it can just hit the opposite outer band. (OO).
Or it can walk the opposite outer band. (OBB). These are the trades to take.
The trades to avoid are the ones where you wait for an entry as the price action walks the BB in what appears to be a bubble. It
may be a bubble or it may not......and turn out to be a sausage instead - in which case you lose. I developed the single candle CBL
using a close and smaller candle to try to discriminate between a BB bubble and a BB sausage. A lot of the time this works. But
you only need a few times when it does not work to ruin your trading, and the resulting losses will set you well back.
So, therefore, avoid, trading from these BB walks - this is counter trend trading and gives poor results.
With 4 majors and other favourite pairs to trade, and umpteen timeframes to trade those pairs, there is sure to be a squeeze
happening somewhere anytime you open your charts. So trade those squeezes and nothing else.
In addition, use the rules given in blue above to determine the trend. DO NOT set a CBL and enter in a squeeze where the
CBL causes you to trade against the trend set in the higher timeframe. This should just about wrap up the rules for trading the
Bollinger DNA method.
Tomorrow I will try to set up the GFT 5 contract entry method as per Graviton's inspirations. This will cater for the averaging of
the entries which the GFT and other platforms do. This method is very subject to you trading with the trend. It should, therefore,
work very well with the macro method to be explained fully later.
TQ- when you trade on the daily charts do you use 2 CBL method to enter? how do you set SL
TA- I don't trade the daily as such but rather use it as a higher timeframe to determine trend. In any case, yes, you
would use the 2 CBL method to enter. The stop loss is set at the extreme wick point away from the CBL of the extreme
candle. The number of pips in the stop loss, therefore, varies.

Thank you for the posts since last night for me.
I am to anwer a number of questions regarding the squeeze............. The best way to anwer the questions is to point out what not
to trade. Then all else is ok - as long as you are going with the trend in the higher timeframe.
Here is what not to trade - given as a red line >>>
In both these cases the part of the line shown in

RED should not be traded!! By avoiding this,
you automatically keep out of a BB sausage also
because a bubble turns into a sausage.
So what is a squeeze? It is any area that does not

consist of a BB bubble or sausage.
Some of these areas may stay squeezed for a long

time but you do not know that. If this is the case,
then you trade anyway and collect small profits
along the way. Or, alternatively, you could stay
out of this area until you see the BB widen
somewhat but NOT a bubble or sausage. To be
sure I will give an example in the next post.

Here is a chart with green and red areas >>>
The green areas - good trading areas The red ones - keep out
A – GREEN - all in a squeeze area. Trade top to bottom, B – RED The finish of a bubble walk - do not trade. The
bottom to top, then top to bottom again ending in a bubble. second part of (B) is the same - the end of a bubble walk, do not
trade.
C – GREEN Entry in a squeeze - price drops in a gap and ends D – RED End of bubble walk - do not trade. The price action
in a nice BB walk. then walks the upper BB in a squeeze area and you would
attempt and entry and lose. This loss would put you off and
cause you to wait until the walk was over.
You do not know when it is going to be over so the down price

action resulting in a walk of the lower BB is also no trading. A
bubble is then formed - no trading and price goes on to area E.
E – GREEN We are in a squeeze area here. Two entry F – RED We are at the end of a bubble walk - no trading.
attempts result in a loss each, then a third entry results in a Price moves to area G.
travel to the upper BB.
G – GREEN Squeeze area. Entry from the upper BB results
in a walk of the lower BB - good trade.
After the above chart, many traders may be considering the macro method. The macro method requires that you judge the trend
direction from a higher timeframe first, then enter by setting a CBL in the direction of the trend. The CBL can be set from any
area but it is a 3 candle set up as was shown originally when I introduced the count back line concept. The macro method will use
Fibonacci measurements on the retracements to determine whether to exit or continue. I am now to devise a 5 contract scale in
method for the GFT program.

Trade any area except the ones
shown. This is true not only for
Rachel, pictured here, but also
for her inverse, namely Denise.
It follows that avoiding these

areas for a BB bubble will
automatically exclude the BB
sausages because to get a sausage
you must first start with a bubble.
Now everything else can be

traded - let me pick you a
random example in the next post.
Let me now give a very random

example for Xelnar, and also for
others who appear slightly
confused. For no particular
reason I chose the following........
This is the very latest from

EUR/USD This chart is
somewhat scaled out so that we
can see a "squeeze" developing
into a BB bubble, then another
squeeze developing into a BB
sausage, then a further squeeze.
The orange areas are the

retracements from the BB walks
and these orange areas are the
NO TRADE areas.
The blue area is where the 2nd

pattern (a bubble), turns into a
sausage with the price action
leaving the upper BB, but
instead of going down, it
reverses and goes up again.
The fact that the price action

does not touch the upper BB
again is irrelevant. Lets now look at the trades in detail.

We first go to trade A by
looking in detail at the squeeze
area at the entry.
OK, here it is >>>
The 1st extreme candle (2

candle CBL) entry is a waste of
time (too close to mid BB).
The 2nd entry is much better. It

is a short entry resulting in an
OBB price action with a BB
walk on the lower band.
Lets have a look at that BB walk

>>>
The exit for this BB walk is

given by the simple exit method
where we exit on the first candle
away from the BB.
The orange area in the oval is

the retracement from this BB
bubble and is a NO TRADE
area. We avoid this area!!

We now go to the squeeze in between the bubble and sausage >>>
The extreme candle A is useless

to us but extreme candle B gives
a long entry. Note the 2 candle
CBL entry method.
It takes a while before the entry

is taken.You see here the power
of the CBL method in avoiding
retracements and getting an
entry only when the price action
shows momentum.
Now lets go to the final part of

this trade on the chart.
The trade goes long from the

doji where it entered. We exit
at the first candle that is away
from the BB as shown.
Up until this point the pattern is

a BB bubble. However, the
price action soon goes above the
exit candle and continues
upwards thus converting to a
BB sausage.
As mentioned before, the lack

of touching the BB is irrelevant.
The BB walk then ends properly and a retracement starts. This is the NO TRADE area shown in the orange square. After that, all
is well to trade again.

I see what I believe to be an important error here!! Lets look at these 2 lots carefully >>>
Assume we are trading LONG.
In the first picture the 1st entry is shown in green.

The stop loss below it is in red. (marked S). The
price goes UP (blue) and after 25 pips we enter
the 2nd lot.
Now in the second picture we have moved our

stoploss to BE (as shown). Then suddenly the
price (blue) goes DOWN back to where it started
to the 1st entry.
So what are our profits/losses? The 1st entry has

gone nowhere - it went back to where it started.
Therefore, the 1st entry scores ZERO. The 2nd
entry went DOWN - and hence it made a 25 pip
loss!! The TOTAL is a LOSS OF 25 PIPS. Therefore the following statement is not correct (repeated from above)......
you probably don't really want to let price go all the way back down to Break Even and
stop out on both lots with no pips for your effort.
............................unless there is something you are doing that I have not taken into account!! But what would that be??
Multi Contract Entry Trading

Here is my considered approach to multiple contract entry trading. It combines many features >>>
Overview
This approach has very much a war zone mentality

about it. A profit is established as soon as possible and
is held onto I have considered the establishment of an
early profit to be mandatory because a retracement
could come at any time.
Also with the DNA method, the trade distance is

relatively short. A slight delay is made before more
contracts are added. After much consideration, I have
stuck with the 2 contract entry............. I find that it
simply cannot be beaten. (obviously designed by
experts). Instead we shorten the initial stoploss to 20
pips. This should be enough to trade your belief - that
the trade is going forward.
A loss here would generate a 40 pip loss which is not too bad considering the reward potential is very great. The extra contracts
are added on every 20 pips. These short distances allow for a maximum profit before a retracement occurs. This setup aims to
generate many pips and do so as quickly as practicable. The whole thing is carefully designed to allow for the averaging of the
entries.
Explanation The blue lines are the levels of price action. The red lines are the trailing stoplosses. The pink lines are the
averaged entries with the entry number listed alongside. The trading steps are given large black numbers and the corresponding
numbers are also given to the trailing stoploss.
The trading steps and their maximum possible losses are now considered.............
1) At price action = 0 we enter 2 contracts and set the stoploss at -20. If the price action drops to the stoploss we
have................
• 2 contracts = -20 x 2
• TOTAL = -40 pips.
2) 2) At price action = 20 we exit and bank 1 contract for a profit = 20 pips. We immediately reset the stoploss to zero.
If the price action drops back to zero, we have.................
• 1st contract = 0 Bank = +20
• TOTAL = +20 pips.
3) 3) At price action = 40 a new 2nd contract is added. The stoploss is immediately moved to price = 20 (trailing).If the
price action drops back to 20, we have...............
• 1st contract = +20
• 2nd contract = -20
• Bank = +20
• TOTAL = +20 pips. (averaged entry in pink = 20).
4) 4) At price action = 60 a new 3rd contract is added. The stoploss is immediately moved to price = 40 (trailing). If the
price action drops back to 40, we have ..................
• 2nd contract = 0
• 3rd contract = -20
• Bank = +20
5) 5) At price action = 80 a new 4th contract is added. The stoploss is immediately moved to price = 60 (trailing). If the
price action drops back to 20, we have..................
• 2nd contract = +20
• 3rd contract = 0
• 4th contract = -20
• Bank = +20
It is possible to keep adding contracts if you wish. (checked and corrected for accuracy, 25 May, 2010).
BBDNA WhiteBoard
A link to our whiteboard can be found on the BB DNA chat home page

I do not know who posted the chart below but it was on the whiteboard.I will go thro it to show how to trade the multiple contracts
>>>
The CBL is correct (the 2nd candle body is

larger than the extreme candle so use only 1
candle).
At line 2 enter 2 contracts. Set stoploss at line

1. Wait.
At line 3 exit 1 contract = +20 pips. Move

stoploss to line 2. Wait.
At line 4 enter a new 2nd contract. Move

The price action drops back to line 3 - hits

stoploss.
1st contract = +20, 2nd contract = -20, Bank =

+20, TOTAL = +20
Keep going - we have not hit the upper BB

yet.
At line 4 RESTART - enter 2 contracts. Set

stoploss at line 3. Wait.
At line 5 exit 1 contract = +20 pips. Move

At line 6 enter a new 2nd contract. Move

At line 7 enter a new 3rd contract. Move

Figure 18
Candle pulls away from BB so exit for an extra 5 pips on all contracts.
Profit Analysis.
From 1st Trade = +20 (Bank).
From 2nd Trade...........Bank = +20, 1st contract = +65, 2nd contract = +25, 3rd contract = +5, TOTAL FOR 2ND TRADE =
+95
GRAND TOTAL FOR TRADE = +115 pips.
I have accomplished my first task - to provide a multiple entry method. I am still to do a demo on the whiteboard - that is next.
Then.............the macro method which will include the Fibonacci retracement approach together with multiple entries.

I always liked my DNA method but now with complaints about losses I have modified it thus.....
1) A second form of CBL with just one candle and followed by a smaller candle with a close below CBL.
2) The final decision to detail NO TRADE AREAS.
This 2nd modification renders the 1st modification obsolete.
So from here on use the original CBL method ..............
- 2 candles if the extreme candle is the larger of the 2.

- 1 candle if the extreme candle is the smaller of the 2.
- cut the extreme candle in half if it is excessively large (touches or goes thro the mid BB).
TQ- I've got the SHI Channel loaded and it works great but how are you getting more than one set of trend lines to show up on
your charts? I can only get one channel at a time
TA- Certain people are starting to add indicators to my DNA method. I am disappointed. We are trying to trade here without
indicators - and the Bollinger bands are merely a substitute for support/resistance lines.
I should make it clear once again that the Bollinger DNA method as I invented it, is a stand alone method that requires no
additional charts or indicators. I am referring here to the orthodox method which is the one from which I will construct the
official PDF. This PDF will not detail the NO TRADING AREAS - these were added on because some readers were testing short
timeframes and getting poor results.
The orthodox method will contain some CBL details that I have not used on this thread, because I have entertained simplicity.
But it is this orthodox method that gives the high win/loss ratio. Using a higher timeframe to determine trend really does little to
improve the efficiency of the method - the counter trading is at its best with this method. Adding indicators will do little to
improve the gain in pips, and at best, will give no greater gains with added complexity. So when I post the PDF, I encourage all
readers to use it as it is, and not modify it.
On the other hand, the MACRO METHOD which will soon be posted, derives its strength from knowing the trend - which is got
from a higher timeframe. But again, here, adding indicators will only complicate matters. I really thought that I had put the use of
indicators firmly to bed when I spent pages on this thread promoting the GMMA, then suddenly dumping the whole affair without
warning!!
Indicators do not assist in trading well. The use of price action is very much the correct way to go!! And that is now very
much the thrust of this thread!!

I will post a number of charts showing the trades, first in the 4 hour charts, then second, in the 1 hour charts. Here is your
USD/JPY 4 hour chart, divided into colors
There are 4 colours, because there are 4
separate trades in this chart. I will take
each color, and analyse it in detail.......
Here is the first trade (light blue

section)
Everything is explained on the chart.

The Total profit is as follows......
TP1 = 9 pips after spread.
TP2 = 9+66 = 75 pips after spread.
TOTAL PROFIT = 84 pips after
spread.
The trade is a standard OO trade.
Here is now the 2nd trade (yellow section)

Error! Reference source not found..
This chart is full of labels and needs careful

explanation...........
We are using the orthodox CBL entry - in this

case, long entries. That is, we are looking to
trade from the lower BB to the upper BB.
Taking the chart from Figure 111, the candles at

A are not considered for a CBL because the BB
are expanding and the opposite BB (upper) has
not contracted yet.
So the next batch of candles are considered and

the extreme yellow candle body is smaller than the second candle bady (red), so we draw the CBL from the yellow candle only as
shown. The PCI stop loss is also drawn as
shown. (in reality, if the price action goes
against you, it is best to close the trade at about
half of the stop loss instead of letting the price
go all the way down to the red line.). At this
point, the upper BB has contracted so we can
enter.
The trade hits TP1 with 2 contracts for 41 pips

each after spread. The PCI stoploss is then
moved to break even at the blue entry line.
However, the price action is not favourable and
retraces to the break even line and continues as
shown by the long red arrow to return to the
lower BB.

Hence we only get one profit of 41 pips. This trade is an OM (outer BB to middle BB) price action trade to the mid BB,
and the continuing price action shown by the red arrow is an RO (retracement to outer BB) price action. RO price actions
are the 4th type of price action (OO, OBB, OM + RO), and is the only type of price action that is untradeable by this
method.
Now that is not the end of the matter!!
With the price action on the lower BB, we look for a trade back to the upper BB. The yellow candle at the end of the long red RO
arrow is an extreme candle and the second candle is a larger body red candle. Because of the larger body of the red candle, we
ignore it and set the CBL from the yellow candle as shown. A 2nd PCI is also shown. A 2nd long entry with 2 contracts is made
but.......alas, it goes against us and we exit at half the stoploss distance = 28 pips each contract. A loss = 57 pips. Taking the 2
trades here = 41-57 = -16 pips.
The total so far (from previous post as well) = 84-16 = 68 pips. We have 68 pips TOTAL SO FAR. At this point, the 3rd chart
(light green) is considered. Here is now the 3rd
chart (green section)
In this chart, the 2nd long entry from the

previous section is shown in order for you to get
your bearings. Now the rest of the CBL are
shown in black.
As the price action falls, the new CBL are

drawn, paying respect to the 2 or 1 candle entry
rules.
The 4th CBL is the last one and no entry is

made at all. The price action finally hits the
lower BB where it is time for a brand new
trade. The last trade is now considered (grey
area) >>>
Again, this chart is full of labels and needs

careful explanation.........
The CBL is drawn in black from the extreme

candle + 2nd candle. This line is above the mid
BB - we cut it in half (shown in blue).
The entry is made in the yellow candle and hits

TP1 for 2 contracts of 32 pips each after spread.
The stoploss is moved to break even.
The trade moves on to TP2=56 pips after spread.

Profit = (2x32)+56 = 120 pips.
We now look for a trade back to the lower BB. Our extreme candle is the TP2 candle - it is too big. We cut it in half and make
that our CBL entry - shown with the blue dashed line. We enter the next red candle at the OPEN (90.28) and hit TP1 with 2
contracts with a profit of 14 pips each after spread. That is a TOTAL of 28 pips.
We move the stoploss to break even and this trade backfires into an RO price action type which is untradeable. OK, that finishes
the whole 4 hour chart senario. In the next post I will add up all the profits.
Here is the full chart again
with the total pips gained
from each section shown
The GRAND TOTAL then,

is +216 pips profit.
This profit is gained using

the 2 contract entry method
and, is stress free.
TQ- Just to confirm ...........we now make the PCI SL 50%

of the last swing hi/low then?
TA- NO!! Give yourself some room for price action to

move. But if you can definitely see that the price action is
not going to go in your favour, then it would be useful to
close the trade at half of the stoploss.
The CBL in this chart is incorrect, I have placed the

correct CBL on it in pink followed by 3 white squares. We
use only 1 candle here because the 2nd candle (the long
red one) is at least twice the size of the extreme candle.
Here is the correction
I am now going to return to the charts given by fartist, this

time, the 1 hour charts. Going from 0400 on the 13th to
1600 on the 31st was relatively easy with the 4 hour charts.
But it will be a long exercise with the 1 hour charts!!
I will see how far I can go. This will definitely be the
last of the presentations of the DNA method. I will be
using the orthodox method as I did in the 4 hour sessions.
Here go the 1 hour charts in absolute detail.

Blue lines=entry, red lines=stoploss, green lines = TP1
Other notes are added.
The CBL rules are as follows.....

1) Use 2 candles normally.
2) If the 2nd candle body is twice as big (or larger) than the extreme candle, we then use the extreme candle only.
3) 2 candle sets (or 1 large extreme candle) that go near or pass the mid BB are cut in half.
Detailed explanations and the total pips are underneath the charts. I have limited the chart detail because it takes ages to edit these
charts.

1st chart The 1st trade is self
explanatory using the simple
exit method at TP2. The 2nd
trade at B cuts the yellow
extreme candle in half. TP1 and
TP2 follow. The 3rd trade is
more complex. The first
extreme candle C is used alone
because the 2nd candle is the
long red candle. It gives a nice
entry (pink) but cannot be used
because the opposite BB has not
yet contracted for this bubble.
We then see a second (yellow)
extreme candle and use that
because we must always use the
most recent one. It is not until
candle E that we can enter
according to the opposite BB
contraction. After that, we get TP1 only.
TOTAL PIPS FOR THIS CHART = +105 PIPS.
Here is the 2nd chart
Both trades on this chart are

simple and require no
explanation.
TOTAL PIPS FOR THIS

CHART = +90

Here is the 3rd chart,
The first two trades are self

explanatory and only get to
TP1. The 3rd trade uses 2
candles for the CBL but this
gets very close to the mid BB.
So we cut the total in half and
set the CBL that way.
Again only TP1. The 4th and

last trade is a loss and needs
close attention. A single CBL
and the trade goes against us
with the BB expanding.
Now we can see that the BB are

expanding and we can see that
the candles are going to do a BB walk on the lower band. So we get smart and exit early before our stoploss. TOTAL PIPS
FOR THIS CHART = +4 pips.
Here is the 4th chart in Error! Reference source not found.

We wait a long time for the 1st CBL which never gives an entry.
Then we get a straightforward entry from the lower BB and a self explanatory trade.
TOTAL PIPS FOR THIS CHART = +119 PIPS
Here is the 5th chart (Figure 19)

and my last one for the evening
(the work required to annotate
these charts is enormous). >>>
This chart shows 5 trades and
needs a good deal of
explanation..........
1st trade : This involves an

extreme yellow candle and its
2nd candle marked A. The pair
go way past the mid BB,
Figure 19
therefore, cut in half (blue
lines). Entry at the next red
candle and goes to TP1 at the
next yellow candle marked B.
The candle B retraces and we
get TP1 only.
2nd trade : Candle B retraces way past the stoploss of candle A, thus forming a new extreme candle. It is also a very long candle
and is cut in half. (blue line). TP1 and TP2 follow.

3rd trade ; This trade entry and stoploss are simple but the entry is made after the opposite BB contracts. After this the trade
backfires and we see that happening with a dropping mid BB and a lower BB walk coming up. We get smart and exit the trade
before the stoploss line.
4th trade : This long trade is self explanatory and is an excellent trade.
5th trade : This short trade is self explanatory with TP1 showing only. It does not hit TP2 - instead the price action goes back to
the upper BB. TOTAL PIPS FOR THIS CHART = +113 PIPS.
I will do one more chart

because there is something I
wish to point out here. Chart 6
Our first trade is a short trade

and the 2 candles combined go
well past the mid BB - so cut in
half then enter on the next
candle (red). This candle hits
TP1 AND TP2 all in one go -
fast profit!!
Our next trade is a long trade -

the red extreme candle gives no
entries. By waiting we find a
new extreme candle and enter
when the opposite BB contracts
(we are entering a slight bubble).
TP1 and TP2 are self explanatory .......but........... Look what we miss out on!!
A whole walk of the upper BB. (sigh) We MUST stick to our trading rules. At the exit of TP2 shown on the chart, there is no
way of knowing that a BB walk was coming. Had we known, we would have held on to the trade. But we did not know. So we
exit.
We must be content with what we get out of the trade.
Next time will be better. Remember - this DNA method is a high win/loss method, not a high risk/reward method. The way to
prosper with this method is to put on high lots, since the trades are short and sweet...............and very reliable!!
Final Conclusion.
I have not come anywhere near finishing the trade sequence compared to the 4 hour section. But we have already made more pips
than the whole of the 4 hour timeframe section. We speculate that as you go down in timeframes, more and more pips can be
made. However, the lower the timeframe, the less the pips between the upper/lower BB.
So I conclude that there is a happy median timeframe which produces the most pips with the Bollinger DNA method. Since I
know nothing about backtesting, I do not know what that timeframe is. But I suspect that it is shorter than the 1 hour timeframe -
we are possibly looking at a 20/30 minute timeframe. Others may venture on this as an exercise!!
User Input- We speculate that as you go down in timeframes, more and more pips can be made.
That's not what I've been finding in back test. H4 gives reliable profits on pretty much all pairs.

Go to the Daily chart and it's virtually impossible to lose on any pair, using orthodox CBL, 1xCBL, 2xCBL, 100% PCI stop, 50%
PCI stop and various levels of profit taking at TP1 - any combination. Some work better, some worse, all profitable. You might
only get 10-20 trades a year on the Daily chart, but that's per pair. Trade 10 pairs and that's 2-4 trades per week, enough to keep
you busy. I cannot get a backtest to show profit at M30 over a 12 month period, on any pair.
Tymen- Thank you for this much needed data, NorwegianBlue!! This is a great encouragement. I especially like your
term...."virtually impossible to lose". This clarifies and reinforces what I have always said - that this DNA method has a high
win/loss ratio. Beginners at trading this method should then really go to the daily charts.
User- Thanks for the feedback NB! I've attended trading training classes where after several days of training on the same system a
group of 20 traders are released to trade for a day. At the end of the day, all 20 traders had slightly different results depending on
pair selection, timeframes traded, and small differences in the implementation of the system.
I also have had very good results with the 4 hour and daily time frames, but I know others have had good results with time frames
all the way down to 2 minutes. I think this system has great potential, but I encourage any new traders to trade it in demo until
they are comfortable with it and are obtaining consistent results. Thanks again for reporting your findings. I'm sure this is helpful
to many.
TQ- Tymen, in some of your charts above, you get out at TP2 on the outer BB and on some charts you get out at TP2 after a BB
walk. Can you explain how you determine a walk is coming? For example, here on your "1st chart"
I assumed it was based on the
expansion of the outer bands,
but I see no expansion here. If
you were trading this live, how
would you have known?
TA- The idea is to smell out the

BB walk, much like a sniffer
dog!! What we do is watch the
mid BB closely. Even the
slightest hint of the mid BB
going up or down together with
even the slightest hint of the
outer bands expanding gives us
reason to delay the exit for just
one more candle or even part of
a candle.
If the evidence for a BB walk
then increases, we delay our exit even longer..... until it becomes rather obvious that we are on a walk. There is nothing wrong
with closing the trade early even if we miss out on the walk - it just means we forfeit those extra pips.

TA- I do not understand the terms EA and PCI. Sorry to display my ignorance in my very first post, but then as to the meaning of
these two terms, I am. Could someone please inform me as to the meaning of these two terms.
User Response: Below is a response from Tyman on another thread concerning PCI.
EA stands for Expert Advisior which allows for automated trading possibilities.
PCI = power, computer, internet.
Any of these can fail. A power failure can be catered for with a power back up. Of course, a laptop is a great solution to this. A
computer failure requires a second computer. 2 laptops will stop the power/computer failures. However, the 3rd problem, the
internet, is not so easily solved. You can have 2 ISP's but I have known the server from the broker to fail. Then you can do
nothing but use the phone.
In my case, my mobile and landline phones are on hotline standby to my broker dealing desk, should anything break down.
During a severe thunderstorm, the best solution would be not to trade and disconnect power and internet lines from a desktop
system. Laptops with wireless internet, could of course, keep going. An expensive ultimate solution would be to use 2 laptops
(one on standby), both with wireless internet to 2 different ISP's. A PCI stop loss is on all your trades. A mobile phone is on
hotline standby to the dealing desk if the whole show packs in.
In summary then, use a PCI stop loss on your trades to protect them from a margin call. If the system breaks down, you then have
peace, and can use the telephone in the meantime until you get things up and running again.
TQ- However, I now find myself with a new quandry. Having relegated myself to trading the 4H and daily time frames, I now
want to know if it is possible to compile a sort of definition of the Bollinger Band Squeeze region.
TA- A squeeze area is any area that is not......
1) a BB walk.
2) a NO TRADE area.
A NO TRADE AREA is the region of price action that occurs after the finish of a BB walk in a bubble or sausage. The price
action runs counter to the mid BB and finishes when the bubble/sausage has contracted again. The squeeze areas tend to be
characterised by a level mid BB.
You can score all 4 types of trades from a squeeze area.........
1) a simple OO price action in which the trade ends by touching the opposite BB.
2) an OBB price action in which the mid BB shows signs of going up/down during the trade and hence proceeding on in a
grand way by going on a BB walk.
3) an OM price action in which mid BB is reached for a TP1 but after that the price action retraces and contact with the
opposite BB (TP2) is not reached.
4) an RO price action in which the price action does not even reach the mid BB before retracing
Trades 1,2 + 3 are profit trades while 4 is a loss trade.

CBL Back Test Results
Hi all, Over the past few week, I've been back testing various pairs with Dodge's wonderful EA. I have back tested both the
multi-lot and the 2 lot strategy on 4 hour charts from 02/03/2010 until 02/06/2010. You may find the Back Test Results attached
(Error! Reference source not found.).
Notes:
- I used a 2CBL approach and cut candles if they were too close to the mid-BB.
- Trades were not only taken in squeezes but also in bubbles and sausages, but a trade with more than 90pips of SL (for a
single lot) was never taken.
- The multi-lot strategy used increments of 50 pips and took profits as soon as the trade was 180 pips in profit (total profit
from all contracts at this point is 340 pips). This figure seemed like a sweet spot, as many trades began reversing after
hitting 180-200 pips profit. Sometimes this worked favorably and sometimes it didn't.
Problems I encountered:
- Most of the drawdown’s occurred in sausages with many fake CBLs.
- The squeeze zones were not perfect for the multi-lot strategy - this is where the multi-lot strategy kept failing. Price would
go in my favor for 100-120 pips, causing 1 lot to be exit at 50pips and 1 to be bought at 100 pips...then PA would retrace
back to 50, causing a premature exit from the trade and only a 50 pip profit. More often than not, this occurred when
taking trades in squeeze zones and hitting the opposite BB, causing price to retrace a little before continuing the move in
the favored direction. It's impossible to predict just how much its going to retrace - but I can definitely say that the 2-
contract strategy yielded more on these occasions than the multi-lot.
- A general issue with the 2-contract strategy is that TP1 is taken and the break even point is set too quickly. It would be
silly to just take TP1 and not move your SL to break even. However, the mid-BB acted as support/resistance on many
occasions, causing very premature exists from trades with only small TP1 profits. On these occasions, the multi-lot
strategy was more resilient and yielded more.
My proposed solution:
If you normally trade with 2% risk to your capital with either the 2-contract or the multi-lot strategies - halve your risk to 1% and
take the same trade with both money management strategies. That way, you will be risking 1% using the 2-contract strategy and
1% using the multi-lot strategy.
The reason I propose this is because it will average out the performance of both strategies and for the reason that we don't know
how well each strategy will perform in the future. It seems like a good "money-management diversification" plan.

User Discussion Tymen I have a question
regarding CBL entries and when is it too late to
enter the trade.
This is a 4 hr chart. At point A there is a CBL

drawn with the red line. If we miss entering at the
red line is there a rule on how long do you have
to enter the trade before you have to declare the
trade missed?
For instance, in this trade I could have entered at

any time before TP2 and made pips, but that
trade scenario is not always the case. There have
been many trades where the PA already crossed
below the CBL but PA is on the 2nd or 3rd candle
after CBL and heading in the right direction but
still above TP1 or TP2.
So is there a rule we should incorporate about

entering a trade too late after the CBL or can it
be considered safe to enter a CBL trade at least
before TP1 is reached?
User Response- Generally a CBL entry should

remain valid until a more extreme candle is set, or until the opposite BB is touched. So you could have entered this trade a little
late and made very good pips. In my opinion though, the highest probability of a good trade is a return to mean trade, where the
trade is taken before the price touches the Mid BB 20SMA average. Others may have a different opinion on this and I welcome
any differing opinions
Tymen- Yes, there is a rule if you can call it that. It is called a maximum chase price. This level is exactly twice the distance
of your CBL candle/candles. After this, you are too late to enter. Personally I would not use such a procedure. If you are too late,
thats just tough - find another trade!!
Trend Trading Review

At the risk of bogging the thread down more, I'll repost some info because it relates to the whole discussion of moving stops too
early and getting stopped out. I know this has been discussed before, in detail, but I don't think it's clear to everyone. So here it is
again, the (not so) top secret trick to make all this stuff work.
The market doesn't move in nice steady 15 or 20 or 30 pip moves. We have to adapt to the market as it is. The market may be up
7, 12, 32, pips on an upswing, then make a breath taking 40 pip downswing clearing out stops, followed by more jagged moves up
again, but that's a correct uptrend by definition.
To trend trade, you want your stop to follow an up trend always below a previous higher low, and in a downtrend stop should
follow above a previous lower high. Whether it's 1, 2, or 3 lows back behind price depends on how much stop you want to run.
So, to keep from getting stopped out and stay in the trend, don't move to BE, take profits, or put on more lots exactly at your
chosen even interval. Say it's 30 pips in a downtrend, wait until the price establishes a lower high, in the neighborhood of 30 pips,

then stair step your stop down and put another lot on, move to BE or take profit. It may be 17 pips one time and 43 the next time,
but that's the way the market moves.
If I'm trading the 1H chart, I'll usually drop down to the 15M or even 5M chart to clearly see the new highs or lows forming.
When starting in a trade, I want my stop on the other side of at least the last high or low. The CBL entry allows you to do that
from the beginning of the trade. As the trade develops, I will put more new highs or lows between my stop and the price to give it
more room to breathe.
Note that when I'm trading the 1H chart, I'm just looking for a cheap entry to a longer term trade. If I don't get that cheap entry, I
settle for small pips and try again. But that just suits me. Others will trade differently. My point is, move your stops and put new
lots on with the market's new lows or highs to keep from being stopped out. That might be 20 pips on one lot and 45 on the next,
but that's the way the market works.
Tymen went through all this before, but it's so important I'm repeating it.
An uptrend is defined by a series of higher lows. As long as price stays above that series of higher lows, that is price doesn't form
a new lower low, it is still in an uptrend, no matter what head fakes it gives you. As long as your stop is positioned below that
latest higher low, it is still properly positioned to stay in the uptrend. Reverse for a down trend.
That's what makes this all work, for me at least. Try it, it's great fun Hope this helps someone. Happy trading.
IMPROVING THE WIN/LOSS RATIO OF THE BOLLINGER DNA METHOD.

The NO TRADE areas previously discussed are risky to trade. Once entered, these areas often see a TP1 profit but a TP2 profit is
much more difficult to obtain. Very frequently the price action retraces so that TP2 is never attained and, on lower timeframes,
TP1 may not be attained either.
I propose a solution to the problems here........

1) In all the NO TRADE areas, we encounter a trade against the direction of the mid BB. The first step is to look for
this and confirm that this is so.
2) Once confirmed, we load a 2nd Bollinger band with the standard deviation set to just one deviation instead of the
usual two.
3) We now use a 2 contract strategy with the usual CBL entry.
4) The TP1 is set at the 1st standard deviation. Once gained, the stoploss is moved (slowly) to the entry point.
5) The TP2 is set to the mid BB.
6) A possible 3rd contract could be risked (I do not recommend it), to go all the way to the opposite outer BB with
the stoploss now at the mid BB.
Special modifications.
1) Because of the very short distance to TP1, many extreme candles will simply be too long for a useful entry. In that case
we set an entry point exactly half way between the outer BB and the 1st standard deviation band.
2) To cater for strong retracements that could easily cause a loss trade, we set the stoploss (PCI stoploss), at least 10/15 pips
further out from the extreme candle. (A third 2.5 deviation BB could be used as a guide for the stoploss).
3) It is important that this approach should be used on longer timeframes only - 1 hour upwards, so as to allow for sufficient
pips to make it worthwhile.
This approach will go a long way towards restoring the win/loss ratio for these NO TRADE areas.

THE MACRO METHOD
Here we have the much awaited macro method. The trading is simple and is a true trend trading method. However, note a few
differences from the BB DNA method........
The win/loss ratio is ordinary. So if you have been spoilt by the high win/loss ratio of the DNA method, then you might be in
for a shock here. Do not complain if you see more losing trades - it is a product of the average win/loss ratio.
We need to know the direction of the trend in the higher timeframe. This is unlike the DNA method which is a stand alone
method. Once we know the direction of the higher timeframe, we trade in the direction of that timeframe. As long as the trend
continues, you should make a profit. It is rare that you would just enter at a major trend reversal.
We use a 3 candle countback line. This is the original method and tries to ensure that the trend is indeed underway when you
entrer. Using 3 candles may well cause you to enter above the mid BB. Since we are envisaging a long trend, this does not
matter. It may also generate a long waiting period before entry.
The exit is generated by use of the fibonacci tool instead of the opposite BB. Retracements are measured using the Fibonacci
tool in your charting program. It is the size of the retracement that determines whether you exit. As such very long trades are
possible as we stay in a long trend.
In the next post, I will look again at the higher timeframes.

The win/loss ratio needs no explanation. The determination of trade direction with regard to timeframes needs good explanation.
Now I have been thro this before but we have new people on board, and revision is a good thing.
So I am going to repeat some very relevant posts here......... I will take an example from the seaside, since that is where I
grew up, and that is what I understand best.
We will look at and analogy with the waves of the sea in 3 parts, each representing a higher timeframe.
The 1st timeframe is very short - it is the little waves that travel about 1 metre or so back and forth on the shoreline.
They do this every 15 seconds or so, depending on where you are.
The 2nd timeframe is longer - it is the large waves, the largest being every 7th wave. These waves propel the water in large
sweeps back and forth upon the beach.
Finally, there is the 3rd timeframe which is

very much longer - 6 hours in fact. It is the
tide, which is generated by the gravity of the
moon first, and also by the sun. The tide
sweeps the water back and forth a very long
way. Have a look at the photos of Derby,
Western Australia. Look at the extremes of
the tide (the longest timeframe) >>>

I will now use these extremes in a diagram in the next post to try to analyse what we are looking at.
Here is my first diagram >>>
The drawing shows a beach and

the sea.
The blue strip shows the sweep

of the water - the little waves of
about 1 metre in cycle from
lowest to highest (peak to peak).
The white area in the blue strip

shows the sweep from
maximum (high water)
to minimum (low water).

Now lets elaborate on this
diagram by introducing the
next higher timeframe, the
large waves peaking at the 7th
wave >>>
The large waves have a trend

of their own, going up the
beach. This trend culminates
in the 7th wave which sweeps
highest up the beach.
However, while these large

waves are in progress, the
small 1 metre waves are still
active, going every 15 seconds
or so. The large waves may
take several minutes between
them.
So each large wave has a lot of little 1 metre waves superimposed on top of it. The little waves are shown in the diagram by the
white areas in each blue strip. The white area shows the maximum and minimum height of these little waves.
The blue strips represent the large waves - there are 7 in this diagram. The 7th wave sweeps highest up the beach as shown in the
diagram. Therefore, there is a "trend" in the large waves. After the 7th wave, the cycle starts again, the 1st wave being very low.
Now if we were to ENTER on this trend, we would do so at the MINIMUM of the FIRST WAVE. We would exit on the
MAXIMUM of the SEVENTH WAVE.
In doing so, we would be correctly following a trend. If the time between the 1st and 7th wave is, say 20 minutes, then we
would stay in that trend for NO LONGER then 20 minutes. (if we stayed longer, we would revert back to the 1st wave and
destroy our trend).
I will now show the final long

trend diagram >>>
Explanation
This diagram appears complex

but it is really very simple.
To save space, I have shown

every major wave as a single
dark blue line.
The red sections are the little

waves superimposed on the
major waves. There are 7
major waves forming a trend of
going up the beach.
After that there is a retracement

and the cycle starts again. Here we see many cycles because the tide is going out and hence the cycles form a trend of going out.
So...........
The red little waves are the very short timeframe. (15 second trend) The blue major waves are the medium timeframe. (20 minute
trend) The cycles (tide) is the long timeframe. (6 hour trend). The blue major waves are showing a trend up the beach (7th wave
is highest). This represents going LONG.
The blue major wave cycles (tide) is going out. This represents going SHORT.
Analysis
If you traded the major wave timeframe (20 min), you would be guided by the tide timeframe (6 hour). Then you could enter at
point B or if you are clever, enter at point C. Then as the water goes out, point R becomes a retracement point which is expected
to happen.
You would then exit at either points D or E or any of the waves after that. You would be trading SHORT and you would make a
profit. You would stay in the trend for 6 hours.
Now if you traded the little wave timeframe (15 seconds), you would be guided by the major wave timeframe (20 min). Then you
could enter at point B or if you are clever, enter at point A.
You would then exit at point C. You would be trading LONG and you would make a profit. You would stay in the trend for 20
minutes.
Finally (not recommended), you could trade the little wave timeframe (15 second) and be guided by the tide timeframe (6 hour).
In that case, you could enter at points A or B, stay in the trade for 6 hours and exit at points D or E. You would expect strong
retracements along the way (point R). You would be trading SHORT and make a profit.
From this set of diagrams we can set some rules for trading trends..........
• When choosing a home timeframe to trade with, always choose a timeframe 4X-6X greater to tell you which way to
trade.
• Stay in the trade for a time equal to the length of the higher timeframe. To do this we are depending upon the
axiom - the trend is your friend. We assume that the probability of the trend reversing during our trade is low.
• If, however, upon entering, the trend in the higher timeframe suddenly reverses, we can expect our stoploss to be
hit.
The use of the 3 candle countback line needs no explanation. Note that we do not discriminate here. Every candle is used -
there are no smaller candle bodies to consider. doji candles are also used.
We now turn to the biggest difference in the method compared to the DNA method - the Fibonacci tool. We use the Fibonacci
tool to measure retracements. However, we do not use this tool until our price action is clear of the entry line. After entry, the
price action may retrace for a time, before it regains momentum and goes back in our favour away from the entry line. We do not
use the F tool until the retracements after our entry line are over.
Then one end of the F tool is placed on the stoploss point. The other end will be placed at the most extreme positive price action
we have reached.
This example will explain >>>

In this chart we have already found that
a 4x/6x higher timeframe shows
upward direction so we want to trade
long. We look for an extreme candle
on the lower BB. Upon finding the
right one, we go back 3 candles and set
the entry line on the chart as shown in
blue. The red dashed line is the stop
loss line.
When the price action starts trending

upwards, we place the F tool at the
points A and B as shown. The point A
remains constant but point B moves
along with the price action. When the
price action starts to retrace, we watch
to see if there is a breach of any of the
Fibonacci lines. You can choose
whichever you like or even set your
own line by modifying the tool in your
charting program.
Note that we are looking for retracement trends, not individual candle spikes that may breach the F lines. When the price
action retraces and breaches your chosen F line, it is time to exit.
It may be a good tactic to choose the 50% line at first so that you manage to get past the first retracements without too much fuss.
After that you could choose smaller and smaller Fibonacci lines so that upon exit time, you do not lose too much. Since we are
going LONG in the above chart, we always place Fibonacci point B at the highest price action point. DO NOT LOWER IT.
That is, do not put point B on the retracement candles.
In the example above, the point B would not be shifted again until we reach the high green candle in the squeeze area at the end of
the bubble. In this way, you will consistently measure the size of each retracement, and hence determine whether to exit or stay in
the trade. For the 2 contract strategy, placement of TP1 and TP2 is a subjective matter.
Suggestions............
• TP1 at the opposite outer BB.

• TP2 is the final exit.
• TP1 at the end of a BB walk (simple exit method).
• TP2 is the final exit.
Graviton:
Great work Tymen! I'm sure there will be much discussion over this method. I'll kick off some of the discussion by pointing out,
as your diagram shows, that any good long trend will have many small retracements. Only one of those retracements (the last one)
will prove to be a true reversal of the higher Time Frame trend. So a one big question in my mind at least is, which retracements
should we ride out, and which should we exit out of with our remaining profit? That is a discussion I would like to open if you
don't mind Tymen.
From one point of view, the best odds are to consider any retracement temporary and always ride through it as long as the higher
TF trend is still in place. That will be the right decision about 4 out of 5 times.
Unfortunately, some retracements are so deep that a trader will wind up giving back 80 or 90% of profit, and some retracements
will actually take all profit and the stop loss too! To avoid this, I agree with you that a limit must be imposed somewhere in a
retracement to exit and to take profit, and 50% is a good starting point. A simple rule is, if we never take profit, we can never win.
Sometimes we may want to risk less than 50% and sometimes more. I'll discuss when I choose to risk less than 50% and when I
choose to risk more than 50% and I'd be interested in hearing others opinions on this specific point.
I actually start out risking very little in a trade. If the trade moves against me right away, I exit immediately. I then stop to
consider if I am really meeting all my trading criteria. If not I abandon the trade there. If I am meeting all my trade criteria, then
my goal is to get a better entry in that same trade. It doesn't matter if the entry point is higher or lower than the previous entry
point, as the market doesn't know where my previous entry point was. It only matters that price goes in my direction shortly after
my entry. I take some small losses on bad entries, but I never take a large loss anymore. Those days are behind me forever, thank
heavens.
If the trade goes in my direction right away, or after a couple tries at getting a good entry, I start to widen the amount I will risk in
it. After a couple tries with bad entries, I give up and go to another pair to prevent repeated whipsaw entry losses. Note that as I
widen the amount I am risking, most of that additional amount is profit, not my own trading capital.
Near the center of the trade I will be risking the maximum amount, and willing to take a 50% retracement, and sometimes even a
maximum of 61.8% of total profit near the center of a trade. I plot trendlines and channels of the trade as it progresses and as long
as the trade is inside the trendline I'm willing to risk more, but if it breaks the trendline, I'm going to quickly tighten my stop and
take my profit. Since I trade longer time frames, I have plenty of time to do this detailed analysis.
But exiting with half or more of my profit isn't necessarily the end of the trade. Remember that most good long trades have many
retracements, but only one (the last one) really signals a true reversal of the longer time frame trend. If the retracement ends, and
the main trend resumes, as will happen most of the time, I will try to gain another good entry, starting all over from the beginning
to try for a good entry and follow the trade some more. Once again, two bad entry attempts and I'm done with this trade and move
to another pair.
Then near the end of the trade, when the price is losing momentum, I start tightening up the stop. I continue tightening up the stop
until the trade stops out, or price returns back to following the longer time frame major trend and profit starts increasing well
again. If that happens, I consider it the same as a new good entry to a new trade and allow the stop to widen again, repeating the
whole process over again. I have on occasion, traded the same pair in the same direction for months like this.
So when looking at this, my risk in pips is shaped like a bell curve. In the beginning I risk very little, near the center I risk more,
and at the end I risk very little again.
This process takes some practice since the important part is to identify how fast to increase the stop in the first half of the trade
and how fast to tighten up the stop nearer the end of the trade. Note that I will tighten up the stop very fast at the end if news
comes out that makes a big change in the fundamentals.
The piece of information we can never know with certainty in advance is how long the trade will run. If we knew that information,
it would be easy to adjust our stops optimally, increasing them in the first half of the trade and decreasing them in the second half
of the trade according to a bell curve.
I use two methods to approximate a solution to this critical question. First I analyze all my trades and determine how long the
average winning trade lasts and how far it moves for a particular pair for a 1H, 4H, daily and weekly home chart trade. While
there is a wide variation, my analysis shows that on average trades are moving faster for most pairs over the past few years than
they were previously, but the size of the moves has remained fairly constant. I also watch the momentum of the price movement. I
do this by observing the size of the candles over many time frames, but some others might use indicators like ATR or ADX to
assist with this.

That's all my comments on determining where on the fib line to exit with profit on a retracement. I would be interested in hearing
your review of this subject and that of any other experienced traders. I believe the MACRO method has great potential and I'm
looking forward to seeing testing results by Dodge and Iron Heart or any others that can help with this task. Thanks for all your
good work on this Tymen
Parabolic Sar Exit

Here is my strategy for dealing with powerful price action retracements. We have found that hitting the stoploss with 2
contracts really causes a substancial loss and hence a great deal of pain. Yet the full width of the entry to stoploss is required for
the trade to be successful because many times, the price action goes against us for a while before reaching either TP1 or TP2. We
cannot, therefore, skimp on stoploss room, so what are we to do?
My proposal is to use either the parabolic sar or the starc bands. In doing so, however, we no longer shift the stoploss to
break even. This is not so bad, considering that TP1 is collected anyway, and we expect to close the trade when we see fit. The
prima facia purpose of the stoploss is to protect us against a computer failure - then we cannot close the trade.
We call the stoploss a PCI stoploss - power, computer, internet. A power failure can be addressed with a spare laptop or battery
backup. Computer failure - 2nd computer (laptop). An internet failure is not so easy but is addressed with a quick hotline call to
your broker to close the trade.
A quick summary here before I reveal the strategy..........
1) No stoploss - PCI failure leads to margin call.

2) PCI stoploss present - PCI failure leads to hitting stoploss, not as bad as a margin call.
3) PCI stoploss + telephone hotline on standby - PCI failure leads to hotline telephone call closing trade
In this chart I have entered a long trade in a NO TRADE AREA. (We have just finished the lower BB walk of a bubble) >>>
By using the parabolic sar to set our stoploss, we avoid that

terrible grey candle retracement between TP1 (candle A) and
TP2 (candle B).
Instead, the stoploss is kept where it starts until candle A, then

goes up with the parabolic sar as the sar goes up.
In this case, the entry candle consists only of one candle, being
a doji (look at the chart). If you look carefully, you will see
that the stoploss only gets near the entry line when you reach
TP2.
The parabolic sar/starc bands stoploss strategy act as a kind of trailing stoploss. The fact is that a trailing stoploss, if hit, will
always give you the worst possible exit for a profit. To get the best exit for a profit, we need a specialised exit strategy.
So far in this thread I have shown you the simple exit method for a BB walk. This involves the exit on the first candle that
disconnects from the BB in a BB walk. However, a BB walk may be long (nice profit!!) and yet have several disconnected
candles along the line.
A later exit is called for. A stochastic is almost useless. Exiting at the crossover of a parabolic sar may also give very premature
exits.

Finding the ideal exit method for a BB walk is an exploration that has pre-occupied me since the very beginning of this
thread.
I am none the wiser just now. But with the thread coming to completion, I can now devote myself almost totally to this one task.
Finding this "holy grail" will be a real winner for both the DNA and MACRO methods.
Many Singaporians on this thread!! You are a clever and hard working people!! The next big ticket in my research is to find a
method for getting the very best exits on a BB walk. The simple exit method is great for BB bubbles but leaves you way from the
best exit on a BB sausage.
The parabolic sar does little better and keeps you in the trade longer than necessary. Exiting on the mid BB after a long BB walk
seems satisfactory but is hardly the best exit you could get. So I am looking further - at the relationships between timeframes, as
they are linked by the square root function. A BB sausage always becomes a BB bubble in a higher timeframe.
The trick is to find the correct higher timeframe.
In answer to Robk and IronHeart.........I see the 15 min timeframe as ok as long as you do 2 things.......
1) When entering at a squeeze and the BB expand thereafter indicating a BB walk pending, make sure you delay your entry
until the opposite BB shows signs of or actually contracts. This is very important.
2) Use a parabolic sar for the stop loss. The PSAR will never get hit - unless it is an extreme case.
This demo trade, taken last night on the chatroom, was a failure at first, then became a success >>>
The initial trade (long) was taken at candle A, a doji, in

a squeeze. The entry marked blue, stoploss in red.
The entry was in candle B. It failed, hitting the

stoploss in candle C.
Candle C, however, became a new extreme candle and

formed a CBL with candle D. The entry does not occur
until it hits the mid BB, making the trade redundant.
But the trade does make it to TP2 at candle E, where
there is a new squeeze and a potential new extreme
candle for going short.
Part 5 EXCELLENT EXITS ON BOLLINGER BAND WALKS

I devote this section to a very important persuit - that of quality exits on BB walks when we deal with both bubble and sausages.
The BB walk is the most powerful form of rapid profit trading there is besides a news release.
It is, therefore, very important that we pay close attention to good exits on these bands as our greatest profit potential lies
here.
The exit on a BB bubble is reasonably straightforward - the opposite BB contracts, the candles start developing on the inside of
the bands, and the stochastic crosses over. The general trend here is nice and smooth.

It is different, however, with the BB sausage. There are many opposite BB contractions with their attendant candles going
inwards and the stochastic goes crazy. This can leave you either utterly confused or with an exit that is way less than what you
could have got.
So here, we are going to try to standardise some of the best exit methods that work uniformly for both BB bubbles and sausages.
Then you will not have to worry about which BB pattern is forming.
In my classification work on the bubbles/sausages I find the following......
Candles that break away from the BB walk....
1) Just before the opposite BB contraction.

2) At the opposite BB contraction.
3) Just after the opposite BB contraction.
I also find that the parabolic sar crosses the mid BB.......
1) Well before the opposite BB contraction.

2) Just before the opposite BB contraction.
3) At the opposite BB contraction.
4) Just after the opposite BB contraction.
5) Well after the opposite BB contraction.
6) NO crossing of the parabolic sar at all.
Each case seems to have its own special variation on the resulting price action afterwards. So I am going to classify these
situations very carefully and see if we can come up with a top quality exit formula. As far as I know, this has never before been
done with the BB.
One classification is already complete.......
When the price action extends very greatly outside the BB, we place on our chart a new outer BB with standard deviation set at
3.3 This is exceptionally high, and if the price action actually reaches that, then we exit. We are almost guaranteed that such an
exit will give the best possible exit for that BB pattern!!
MANDATORY READING - read the second article in this hyperlink, entitled .....
"Tate on Trading - LTCM and the Quest for the Holy Grail."
If you have read this article before - then read it again. As a school teacher, I say that revison is a very good thing >>>
Trading Game Newsletter
**************************
Having the original article in my possession, I have found that the above version has been edited. Below is the material
that has been edited out of the original............
"It is undoubtedly true that we need entry signals or setups to enter the market but their importance in trading is
vastly overrated. Tomes have been written about signal generation, indicators move in and out of vogue, the current trendy
indicator appears to be the moving average ribbon. Charts of price action are now being buried beneath layer upon layer of
coloured lines. It is as if by obscuring raw price action traders somehow hope to divine its intent.
Yet Charles LeBeau author of The Technical Traders Guide to Computer Analysis of Futures Markets claims to have
tested every possible combination of moving average conceivable and found their performance to be little better
than random probability. In any serious testing trend following indicators struggle to have a reliability of above
50%. The MACD histogram, which is thought to be among the best of all indicators, often has a reliability of below
50%. I have personally run a test trading the SPI on an intraday basis by tossing a coin in the morning and found it
to be profitable. It is extremely difficult for traders to accept that the tools they use may not be as effective as they thought, or that
their methodology may have reliability below that of simply tossing a coin."
The retracements need not be a problem at all if you.......
1) trade the squeeze areas only.

2) use a parabolic sar as your stop loss indicator as I have shown in previous posts on this thread.
Finally I use the DNA method myself (a refined version of it that I am keeping secret for now). I recommend that you forget the
candlestick method and update to the DNA method for immediate profits!!
My own research into the best BB walk exits has not shown anything that is useful so far. So I will keep researching!!
I have looked at Donchian channels, Keltner channels, TEMA/DEMA crossovers, moving averages of various kinds and
variations on the parabolic sar. All these are indicators and hence are very limited. We can see, with reasonable accuracy, a good
exit point on a BB bubble - the 1st candle to disengage from contact with the outer BB.
But with a sausage, it is different.
• The price action restarts its BB walk (sometimes no actual contact with the outer band).
• To do a bubble exit and re-enter when price resumes its BB walk is frought with danger.
• The resumed walk could be only very temporary and turn out to be a retracement in disguise.
• If trading a multiple entry, then you could be in for a big lose with such an approach.
So........................ I will soldier on and continue research >>
My last post for this evening. Still searching for those quality exits on the BB walks.
I have now looked at many sma, ema and wma settings, written a heap of computer indicator programs to test. Also built as series
of sma BB, ema BB and wma BB with the standard settings and overlaid them with the same BB with settings of period 10 and
40. Examined and tested various crossover points. Still nothing good.
But now I have found what I see working best of all - not the extremely best exit (you would need to be clairvoyant to get that),
but a very high quality one for every intent and purpose.
The method is unexpected and simple........
Just load a MACD with settings......short = 6, long = 19 and signal = 9.
99% of the time, there is only one crossover - and that is your exit signal. Of the rare times when there are 2 signals (one
premature), Gerald Appel gives simple rules to negate the first exit and take the second one instead. I shall give them in another
post - tomorrow (diagram included).
After this is sorted, we now need to see the very best way to add on the mulltiple contracts!!
I am now going to attempt to integrate the business of setting a retracement proof stoploss and top quality exit all in one package.
To do so I am going to show 3 exit strategies......
1) use of the MACD.

2) use of the parabolic sar/mid BB.
3) use of Heikin Ashi candles.
The 3rd option, which I am very familiar with, has not been shown on this thread to date, and little of Heikin Ashi theory of any
real quality come on this forum. I will change that. Each of the exit strategies uses the parabolic sar/mid BB as a stoploss line
in a special way to be outlined in the following posts.
In the following charts, I need to point out a

definition for future reference >>>
In each of these charts the price action is going

long. The parabolic sar is hence moving upwards
but inverts itself when price retraces.
Note that the sar is in standard form when the

price is going up in a long trade. Note that the
sar is inverted when we encounter retraces.
As such, the parabolic sar NEVER touches the

price action. This is what makes it so
powerful as a PCI stoploss.
First I must establish an important criterion

to go on.....
As a stoploss, the parabolic sar is not acted on

unless there is a close on the wrong side of the
sar - for example, in a long trade, we have a close
below the sar.
This will NEVER happen while the sar is in

standard form because of the nature of its
mathematical derivation.
It only happens when the sar is in the inverted

form - and at that point we simply pause the
shifting of the stoploss and wait until the sar
returns to standard form.
So the parabolic sar as a stoploss makes us feel

secure because we know beforehand that the
price action will NEVER touch it. And when it
inverts we simply wait for it to return to standard.
But the price action may retrace very greatly while the sar is inverted!! What do we do then?
The final word in the stoploss comes from the mid BB.
If at any time, the live price action (not just the close) hits the mid BB, we exit the trade, even if the close give us a better
exit. We will now see how this outworks itself in the following posts. I now look at a long trade and see how the 3 exit methods
stack up against each other. We will first examine a BB sausage >>>

In this case, a Di Napoli MACD and a parabolic sar have been
added.
You can use this MACD which has the values…..
• FastEMA=8.3896;
• SlowEMA=17.5185;
• SignalEMA=9.0503;
or the standard MACD which has the values….
• FastEMA=6
• SlowEMA=19
• SignalEMA=9
Here you can please yourself whether you want to use the
parabolic sar or the mid BB as your stoploss.
In the case of using the MACD as your exit method, it does
not really matter which one becomes your stoploss.
That is why I have put both the sar and the mid BB on the chart. There are 2 exit points given by the MACD, the second being
superior to first. How do we know which to use?
Gerald Appel, the inventor of the MACD, gives the following exit rules on page 177 in his book, "Technical Analysis, Power
Tools for Active Investors."..........
1) if there are no divergences,

2) price above (in this case) mid BB moving average.
.......then ignore 1st signal but definitely take 2nd signal.
These factors are both true in the above chart so we take the 2nd exit signal for a great profit!! This is a quality exit.
We now look at the same chart, this time using the parabolic sar/mid BB combination to do both jobs, that is, to give us a quality
exit while operating as a stoploss at the same time.
Here is the chart again, this time with letters >>>
At point A, we spot and extreme candle and set up our CBL

and enter.
We load a parabolic sar and set our stoploss at the low of the
extreme candle. The stoploss stays there right thro getting
TP1 and does not move until it makes contact with the
parabolic sar in standard form.
The stoploss makes contact with the sar just after hitting
TP1, when the price action starts to rise upwards past the
mid BB. The stoploss is then moved along the parabolic sar
line.
The price action reaches B, where we suspect a BB walk

because the outer bands are starting to expand and the mid BB is going up. The stoploss has moved in accordance with the PSAR.
At C, the parabolic sar, and hence the stoploss, cross the mid BB. Remember, that the mid BB acts as our ultimate stoploss.
At D, the parabolic sar inverts - the stoploss is put on pause. The close does not cross the sar - there is no exit. We wait.
Then the sar returns to standard, and price action graduates to E where it crosses the upper BB. This makes an excellent exit
point.
If, after an inversion and restoration of the parabolic sar, the price action hits the outer BB, exit at that point. This point
usually makes the very best exit, and it is rare for the price action to improve much later after this. Should we be careless and not
exit at E, then we will see the price action retrace very rapidly and we then take the compulsory stoploss exit at point F, which is
the mid BB. PLEASE STUDY THIS POST CAREFULLY - THERE IS A LOT IN IT.
Point D will now be examined in greater detail.
Here we have point D greatly magnified >>>

Remember that the parabolic sar became
inverted at this point. The paused stoploss is
shown extended as a red dashed line.
Note how the close of both the red candle

(down) and the yellow candle (up) are both
above the dashed stoploss. Therefore, there is
no exit at this point.
However, had the yellow candle hit the mid BB

while under development, then that would have
been an immediate exit. This is my last post for
the evening - it is getting very late. Here we
have a bubble + sausage combination >>>
We will see how, amazingly, we enter long with a CBL at point A, and exit at the very high quality point E.
Our stoploss is set at the low of the extreme candle and follows the parabolic sar. We feel secure because we know that the
price action will never hit the sar!!
After the entry at point A, we get TP1 at the mid BB, then hit the
upper band but wait for a possible expansion of the BB (which
happens) in hope for a BB walk. Our hopes are granted - the BB walk
commences.
Normally we would use the simple exit method and exit at point B.
But we do not exit at point B, because we are using a superior
method!! At point C, the parabolic sar, and hence the stoploss,
crossover the mid BB.
At point D, the parabolic sar inverts, and the stoploss is put on pause.
The following candle closes are above the extension of the stoploss.
So no exit. We wait.
The parabolic sar returns to standard. The price action then hits the
upper BB signalling an exit but......+ We have entered a squeeze (the end of the bubble) + The mid BB is rising steeply + The
parabolic sar is in standard configuration.

We take the trouble to wait one more candle and this pays off becaue the BB expand again for another BB walk!! The stoploss
follows the sar and finally at point E the sar inverts again. This time the paused stoploss extension cuts thro a red candle and the
close is below this extended stoploss. We exit - a quality exit!! NOTE - this trade was not cherry picked.
Let us now start out with our first trade - here it is >>> Remember this one? Here is the HA version >>>
Explanation. We have not included the parabolic sar,

since on the HA chart it would be false.
If you want the PSAR, then put it on a standard candle
chart underneath. In any case, the mid BB serves as our
ultimate stoploss.
Very Important!!
Up to TP1, the standard candle chart applies. The HA

only applies when we have a BB walk. After TP1 we are
already in the trade looking for TP2 and suspecting a BB
walk.
We exit on the change of colour at X1. We watch and

wait. We see the trend starting again and candle A,
which crosses the upper BB, is our cue to re-enter. We
re-enter at E2. We exit on the colour change of X2. Our next cue it candle candle B which touches the upper BB and we enter at
E3. We exit on the colour change of X3. Then candle C, and E4/X4 follow the same proceedure.
After X4, the candles are red and hit the mid BB = end of trade. In the Heikin Ashi exit method, several re-entries and exits
occur, making it different from other exit methods.
Let us now join the standard chart and HA chart together to see our entries and exits in real time >>>
If you had followed the method above

exactly you would have made a loss on the
last 3 entries/exits. However..........
Assuming we have a strong trend indicated

by the mid BB, then we could enter every
time at the first green HA candle instead of
the one that passes thro the upper BB.
If you had done that, then you would have

made a good profit on all of the trades,
except the very last one, in which you
would have sustained a loss.
Of the 3 exit methods, I definitely prefer

the Parabolic Sar/mid BB method. The
Di Napoli MACD method does not always
give a great exit, although many times it
does.

This can be a great exit method as long as it gives one signal crossover. However, it suffers from the fact that it can give 2 signal
crossovers, and certain rules have to be applied to see if the first early crossover can be ignored. Most of the time, the first
crossover can indeed be ignored but how can you tell if there are 1 or 2 crossovers? Ths can only be seen in hindsight.
So if you ignore a crossover, thinking that a 2nd crossover is to come, then what do you do if a 2nd crossover does not come? The
answer is that you are faced with exiting as the price action hits the mid BB - and that may turn out to be a very poor exit indeed.
In summary then, with the MACD, you have a certain lack of control over where your exit is destined to be.
The Heikin Ashi exit method looks very attractive with all those green candles lined up so nicely side by side. It gives a real
feeling of strength to your trade. But that is where the illusion ends!! The candles do not indicate real price, and, therefore, what
looks to be an up candle in HA, is really a down candle in real price!! Beware of false encouragements!!
Furthermore, even if entry is made on the very first HA candle in your favour, the trade is nevertheless broken up into pieces by
the HA method. You enter, exit and re-enter again. Extra pip spreads are involved here. And finally, even with the most astute
entries, there is still potential for a loss!! In the end, the fact that losses can still occur, nails this method as unsatisfactory. So, in
spite of the wonderful and beautiful candle arrays enticing you to use the HA method, all is not what it seems, and the potential for
loss, the breakup of the trade and the false price action make this method a last choice for quality exits.
The MACD exit method requires you to know the future, to know in advance whether you are going to have one or two
exits. You cannot know this. If you assume 2 exits when there is only one, then very poor exits can result. Therefore, this
is not a preferred exit method.
The Heikin Ashi exit method breaks up the trade into several entries and exits, each with an extra spread of its own. There
is a distinct possibility of loss on one or more of these trades. Therefore, this is not a preferred exit method.
The Parabolic Sar/mid Bollinger Band exit method incorporates the parabolic sar as a stoploss guide knowing that the
price action will never cross this line. Even when inverted, the close must cross the line - something that happens only
when the price action reaches its best profit level. The PSAR acts as a psychological encourager, something unique in a
trailing stoploss. The mid Bollinger Band acts as the secure ultimate stoploss and is rarely hit because the BB walk is a
powerful trend. Therefore, the Parabolic Sar/mid
Bollinger Band exit method is the preferred
quality exit method.
OK, last post for the night - have a gander at this

beautiful trade!! >>>
Lets go thro the letters to see the stages in this

LONG trade.......
Candles A/B are the CBL pair with a blue line

extending as the entry line. A red dashed line
extends from the bottom of the extreme candle - this
is our stoploss.
Candle C is the entry candle.
We take TP1 at the mid BB, then we look to take

TP2 at candle D but......
At candle D, we see that the outer BB are expanding

powerfully and the mid BB is going up - sure signs
of a BB walk coming up. So we delay TP2 to get the benefit of the BB walk.
At point E, the PSAR crosses the mid BB and hence the mid BB takes over as the ultimate stoploss. A touch of the mid BB from
hereon means immediate exit.
We now smile, smile, smile as we wait, wait, wait and watch the price action go up, up,up. We follow the parabolic sar with our
stoploss - shown by the little red lines across the sar.
At point F, we have a parabolic sar inversion with a long wicked, red candle. The trailing of the stoploss along the sar is halted,
and the red line extension, (shown), touches the lower wick of the red candle. However, we only exit if the CLOSE is below the
parabolic sar, which is not the case with the red candle, nor with the next 2 green candles under the inversion.
At point G, the parabolic sar reverts to standard form, and we restart the trailing of the stoploss along the sar.
At point H, the special trading rule from post #3887 on page 389 which says......... If, after an inversion and restoration of the
parabolic sar, the price action hits the outer BB, exit at that point. ........applies!!
Point H is a very excellent exit indeed!!
If you look carefully, you will see that this is a BB sausage with 3 false retracements before the final geniune retracement after H.
After the 2nd false retracement, the trade appeared to be a BB bubble. Note that at no time did we concern ourselves with whether
this was a bubble or a sausage. We just traded!!
And so we gain the most from a trade - and that we did with an air of mastery and complete confidence!!
Taking Profits I see the situation a little differently.
My approach is the time honored one - a trade is not finished until the price action either hits the stoploss or hits the take profit.
This is called macro-managing a trade and allows you to leave the computer and return later. If you lose, you move on to the next
trade. If you lose, the number of pips you lose = 2% of your total funds by calculation beforehand.
I believe that the advantage of this macro method is that you are allowing for breathing room in your newly started trade, so that
any retracement can regain momentum and go on in your favour. If your are wrong in bailing out quickly, then you miss out on
the entire trade. If you did not bail out early when you should have, then you hit the stoploss.
But then you should only lose 2% of your funds. I believe this to be the correct use of a stoploss - otherwise, why have it. It
comes down to the theory of a stoploss and why you have them in the first place.
In stocktrading, there is no leverage and hence no margin. A drawdown is, therefore, easily handled. A stock will never lose its
entire value unless it is delisted - you are then careless for selecting that stock!! So a stock can go down in value, but with no
leverage and no margin, your equity can absorb the drawdown until the stock goes up again. In stocktrading, with no leverage or
margin, a stoploss is not really necessary.
In forex, we have leverage, and, therefore, a margin. Without a stoploss, our margin would become our unwilling stoploss!!
Therefore, a stoploss becomes essential.
We then allow for the possibility of price action hitting this stoploss but in doing so, we have already allocated no more than 2%
of our account to do this. Again I say, this is the correct usage of this tool. We live to trade another day. As you can see in my
examples, not only is the win/loss ratio high, but the risk/reward ratio is also extremely favourable!!
You must always move the stoploss along with the parabolic sar only. This may sound all strange to you but it works!! The
exitence of the PSAR on our chart give us encouragement (because price action will never hit it) and so we need not worry about
bailing out of a trade early. The only time when there is a possibility of price action hitting the stoploss without our control is the
period between the entry and PSAR reverting to standard form. In the chart above, the PSAR reverts to standard form at the green
candle just before candle D. I hope these answers help you.
To be sure, I think the Graviton and I would both agree that you should set a stoploss at the point where you believe that if the
price action goes there, then the price action will no longer go back in your favour. In other words, the point of no return.
I have set the stoploss position at the end of the wick of an extreme candle because that is candlestick theory. However, for you,
the point of no return, (the stoploss), may come a lot sooner. If so, you should set your stoploss line at the position that you
believe is the no-return point. This point may be well before the wick end of an extreme candle.
Of course, if you set your stoploss too soon, you will suffer from what a lot of newbies suffer.................the premature stopping out
of trades. Many a thread on this forum has been devoted to just that subject!! Being an experienced trader, it would not do my
reputation any good if I fell into that trap. So that is what I seek to avoid here and hence I set the stoploss where it is in this DNA
method - at the wick end of the extreme candle.
Exits
Now I am going to set the rules for the quality exit once and for all - and index the posts. We start here >>>
In any BB bubble or sausage, long or short,

there are 4 types of price action.
They are :
a) Initial breakout - diagram A.
b) Continuing price action - diagram B.
c) Level price action - diagram C.
d) Retracement price action - diagram D.
Condition A exit is delt with by way of an

Extreme Bollinger Band with standard dev =
3.3.
Conditions B, C + D exits are delt with by way of the parabolic sar/mid Bollinger band method. In the following diagram
we assume a LONG trade. The
exit rules are the same for a
SHORT trade but the picture is
upside down. In this diagram, the
price action is shown by the green
arrow >>>
The Bollinger Bands are in pink,

the Parabolic sar in blue and an
exteme Bollinger Band (standard
dev = 3.3) is also shown in black.
Stoploss lines are in red. Labels
are also color coded.

EXIT RULES :
• A Parabolic Sar is loaded onto the chart.
o The stoploss trails along the PSAR.
• The stoploss always trails along the PSAR from the very beginning.
• It never trails along the mid Bollinger band.
• When the PSAR has not yet crossed the mid Bollinger band, (grey section), the PSAR is the only and ultimate
stoploss.
• After the PSAR has crossed the mid Bollinger band, (yellow section), the mid Bollinger band becomes the ultimate
stoploss.
o Because of its mathematical construction, the price action will never touch the PSAR. Therefore, it is
impossible to get a stoploss exit while the PSAR is in standard form. Knowing this, the PSAR acts as an
encourager as the price trends.
• When the PSAR inverts, the trailing of the stoploss is halted and the stoploss line is extended to the right for the
duration of the inversion. When the PSAR returns to standard form, the stoploss continues to trail the PSAR once
again.
An exit can only be obtained when...
a) The price action hits the Extreme 3.3 Bollinger band after several candles,
(Condition A).
b) When there is an inversion (Conditions B, C +D) :
a. An exit is made if the CLOSE passes thro the extension line of the stoploss during the inversion.
b. An exit is made if the live price action hits the mid Bollinger band at any time during the inversion.
c) An exit is made at the outer Bollinger band after an inversion, should the price action get there. (Assuming the
trade is still underway). (Conditions B, C + D).
Here is a recent trade with a BB walk on EUR/USD 15min
The area traded is the grey BB sausage. The

yellow bubble is a BB bubble mounted on top of
the sausage.
The entry, made in the grey sausage, also exits in

the grey sausage. There is no possibility of re-
entry into the yellow bubble.
The exit in the grey BB sausage is excellent.
We now look in detail.

Here is the entry to the grey sausage in detail, a long trade. By
the time the price action touches the upper BB, it is obvious that
we are in for a BB walk so we delay the exit
The entry is made in a squeeze area.
The CBL of Candle 1, an extreme candle, does not enter into

candle 2. However, the CBL of candle 2 does make an entry
into the green candle 3.
The PCI is made at the low of the extreme candle 2. L
Lets look at the exit using the PSAR/mid BB method >>>
While the PSAR is in standard mode, and exit is impossible.

This makes us feel good as we see the price action going up and
we are counting the pips!!
When the candle marked INV has finished developing, the

PSAR inverts. The climb of the stoploss line is halted and
extended to the right.
We see that the close of candle X is below the extended stoploss

line. According to the rules, this means EXIT!!
We do exit at a very good profit.
Entry = 761
TP1 Exit = 770
TP2 Exit = 851
Profit on trade in 15 minute chart = TP1 + TP2.

Profit = 9 + 110 = 119 pips.
Wow!!
Time taken = 5.5 hours.

Profit Rate = 21 pips/hour (1 pip every 3 minutes).
Stoploss = 21 pips.
Risk/reward ratio = 21/119 = 5.7

We now look at the shortcut method where we enter on a BB
walk only.
Here we see [7] of the entry rules clearly shown at the point of
the black, vertical line >>>
BB Breakout Entry Rules

RULE 1 - a BB walk is considered when there is a
candle that passes thro the upper/lower BB with
its wick or body.
RULE 2 - this candle must develop from a
squeeze area.
RULE 3 - at the time of this candle appearing, the
outer BB must be expanding together, and the
mid BB either rising or falling depending on
whether there is a long or short BB walk.
RULE 4 - the candles must develop in stepwise function to the upper/lower BB. The rise must not
consist of one only candle rising to the outer BB.
RULE 5 - After the signal candle (Rule 1), entry is made on the next candle if and only if the price
action on this candle passes inwards to touch/go thro the 1. standard dev. BB. Entry is made upon
the touch/pass thro or better. A 2 contract entry allows the 1st entry to be improved upon with the
2nd contract.
RULE 6 - If the BB does not expand again with the entry candle, then no entry is made.
RULE 7 - If, after making entry, the next candle (signal candle, entry candle, next candle) does not
show both BB expanding, then a quick exit is made for safety.
TQ- I'm leaning towards just touching the 3.3 [Bollinger band] rather than closing above it at the moment.
TA- Touching is fine. The principle of operation here needs to be understood clearly. This 3.3 BB approach deals with
BB walks where the price action rises/falls very strongly during the walk, then collapses strongly afterwards. The aim
of the extreme BB is to capture the price action while it is still running hot.
So it is not so much the figure 3.3 that is important, it is the fact that this is an extreme BB and, when hit, signifies an
extreme price - which is what we are looking for. Afterwards, the price action nearly always collapses in these cases, so
exits afterwards are no good.

Example Entry BB Breakout
The Rules
We are coming from a squeeze area (Rule 2).
At the black vertical line, the candle clearly passes thro

the upper BB (Rule 1).
At the black vertical line, the outer BB are expanding

and the mid BB is rising (Rule 3).
The candles have developed in a nice stepwise manner

up to the signal candle (Rule 4).
The BB continue to expand at the entry candle (shown)

(Rule 6).
The entry is made when the price action touches or

passes inwards thro the BB of standard deviation = 1.5.
(shown) (Rule 5).
The next candle after the entry shows the BB still

expanding so we stay in the trade (Rule 7).
Now the PSAR/mid BB stoploss method can be used to effect a quality exit but this is really intended for full DNA trades.
I am working on a shorter stoploss that gives quality exits just tailored for this shortcut method.
You can see that by entering at the inward 1.5 BB point we set ourselves up for an immediate profit as the price action expands to
the outer BB and beyond. This should inspire a real confidence. Furthermore, an extra contract can be added at the opening of the
next candle. This should only be done twice, giving 3 contracts in all unless you made a double contract entry in the first place.
Here are the possibilities.......
• entry - 1 contract. • entry - 2 contracts.

• open of next candle - add a contract. • open of next candle - add a contract.
• open of next candle - add another contract. OR • open of next candle - add another contract.
• 3 contracts in all. • 4 contracts in all.
Do NOT go above these limits - there will be a certain amount of retracement before the exit and you do not want to be caught
out.

EXERCISE 1
The above 7 shortcut entry rules are not in the best logical order. Take the above 7 entry rules and put them in the best order to
work out if an entry should be made.
Another example
Here we have a BB bubble with a BB walk on the

lower band with excellent profit potential.
The area in the square is the entry area and will

be magnified in the next post.
Assuming we are in the trade, note how the PSAR

follows the price action down.
When the PSAR inverts, the trailing stoploss is

halted, and an extension line is drawn from the last
standard point.
The closes of the candles do not cross the stoploss

extension line, so we stay in the trade.
The PSAR then reverts back to standard.
The rules state that if there is an outer BB hit after

the PSAR reverts to standard, then we exit at the
hit point. This exit is shown.
It is truely excellent.
Now the magnified area to show the entry
This chart shows 4 things.....
• the outer BB,

• the mid BB,
• the PSAR
• and the 1.5 standard deviation BB (thin
line).
At the completion of candle A (black vertical line)

we can see that both outer BB are starting to expand
and the mid BB is starting to go down.
At candle B, we note that the upper BB is no longer

expanding and we cancel entry (Rule 6).
At candle C, (blue vertical line) both BB are

expanding again so an entry is again possible.
This entry is made at the 1.5 standard deviation BB
as shown on the chart.
At candle D, the outer BB continue to expand so

we stay in the trade.

EXERCISE 2
Spot the entry on the first chart and note the very long distance from the entry to the exit.
The total profit was 59 pips on this 15 min chart.
Calculate the pip rates......
1) how many pips/hour.

2) how many pips/minute.
To all those who did the 2 exercises......
The sequence order has no hard and fast correct order. The purpose of this exercise was to get you to think logically about the
rules so that you could make sense of the entry. This you have accomplished very well. As for the 2nd exercise, the answers are
correct, it was a simple arithmetic matter.
User Answer for exercises 1 and 2:
Exercise 1 - Order of rules:
RULE 1 - this candle (signal candle) must develop from a squeeze area.
RULE 2 - the candles must develop in stepwise function to the upper/lower BB. The rise must not consist of one only candle
rising to the outer BB.
RULE 3 - a BB walk is considered when there is a candle that passes thro the upper/lower BB with its wick or body.
RULE 4 - at the time of this candle appearing, the outer BB must be expanding together, and the mid BB either rising or falling
depending on whether there is a long or short BB walk.
RULE 5 - If the BB does not expand again with the entry candle, then no entry is made.
RULE 6 - After the signal candle (Rule 1), entry is made on the next candle if and only if the price action on this candle passes
inwards to touch/go thro the 1.5 standard dev. BB. Entry is made upon the touch/pass thro or better. A 2 contract entry allows the
1st entry to be improved upon with the 2nd contract.
RULE 7 - If, after making entry, the next candle (signal candle, entry candle, next candle) does not show both BB expanding, then
a quick exit is made for safety.
Exercise 2 - Pip rate calculation:
1) (26 bars * 15 mins) = 390 mins

59 pips total / 390 mins = 0.15 pips per minute
2) (26 bars * 15 mins)/60 = 6.5 Hours

59 pips total / 6.5 hours = 9.07 pips per hour

Here is a lovely EUR/USD 15 min trade using the shortcut BB DNA method. This trade is developing as I post
Candle A is the signal candle.
Here the first BB expansions start, the mid BB is going up and

candle A has passed thro the upper BB.
We cannot enter, however, until candle B, further up the track.

This is because Candle B is the first candle where the price
action passes thro the 1.5 dev. BB. (shown on the chart).
The price action then goes up nicely and we smile. After entry,
it seems safe to add an extra lot at candle C and another one at
candle D. After that we had better leave it alone.
This method seems to offer 2 extra opportunities to add an

extra lot.
The parabolic sar tracks the price action nicely and there is an
inversion further up where we extend the stoploss line - line E.
Lets look at an update of this chart.............. Here we have the

conclusion >>>
The close of candle E has passed thro the stoploss extension

line.
Hence we exit at this close.
If no extra lots were added then we make 53 pips in 2 hours 45

minutes.
One extra lot would have added 27 more pips but a 2nd extra
lot would bring a loss on that lot of -1 pip.
Therefore a full trade would have netted us a total of 79

pips.
I have now incorporated Ken DoubleU's modifications into

my final slopemeter code.
I had to re-insert the zeroline code because the computer would

not draw the zeroline at all.
The final code in CTL format for GFT is given

below........
OK, I have finalised the new Slopemeter code.
The new input pipdiff = 1.5. This is now the default value for all 15 min pairs, and is changed from the original value of 3
All the credit for designing this new version goes to Ken DoubleU. He is becoming a giant here in a very short time. Thanks
heaps for the help Ken!!

Slopmeter Code
************************************************** ********
indicator AA_BB_slope_meter ;
input pipdiff = 1.5;
draw zeroline("zeroline", solid_line, black,2),

entry_long("long", solid_line, green,2),
entry_short("short", solid_line, red,2),
res("slopemeter", solid_line, blue,2);
vars i(number), avg(series), pip_fctr(number);
begin
if close[back(close)] <10 then

pip_fctr := 0.0001
else
pip_fctr := 0.01;
zeroline := makeseries (front(close), back(close), 0);

entry_long := makeseries (front(close), back(close), pip_fctr * pipdiff );
entry_short := makeseries (front(close), back(close), -1*pip_fctr * pipdiff );
avg := sma(close,20);
for i := front(close) + 20 + 1 to back(close) do
res[i] := avg[i] - avg[i-1];
end.
************************************************** ********
Here is a pre-built slopemeter using Tyemen’s method for MT4

http://forums.babypips.com/attachment.php?attachmentid=13138&d=1280974506
Please read the following post carefully - it is important!!
Now what is the purpose of this indicator in the Ultimate BB Profit grabber?
Well, when a BB bubble/sausage occurs, the mid BB changes slope sharply. At the same time, the price action develops candles
that pass thro the outer BB. We have used this as an entry signal. But this as a signal to enter is not always reliable and at these
points the mid BB slope is not steep enough.
Furthermore, there are times when all of the 3 BB start to go up or down at the same time. That is, they stay parallel.
In these cases, the price action walks the BB, giving a great trade - but we cannot enter because there is no BB expansion (BB
expanding outwards in opposite directions.). Remember that one of the 7 entry rules is that we see the outer BB expanding. Such
trades have great profit potential and we miss out on these with the present 7 rules.
So the slopemeter comes to the rescue!!
I have measured the required slope of the mid BB of being at least 3 pips/candle and preferably 4 pips/candle for a 15 min chart. I
will still have to check what it is for other timeframes.
I suspect that they are connected by a "squares" or "square root" formula. If that is the case, I will need to use some semi-
logarithmic graph paper (which I have), to plot the correct values and establish the equation joining the timeframes. When this is
done, we can fill in the needed values for every timeframe.
To sum up.....The slopemeter provides an accurate signal as to when to enter a bubble/sausage.

Now here is an example of how the Slopemeter indicator works....
(yes I do hate indicators and if you can do this by eye, so much the better).
Lets look at a BB bubble >>>
This bubble shows a beautiful price action walk on the upper

band. The PSAR is shown.
The close of Candle B is the exit candle (stoploss extension on

inverted PSAR).
However, if you can see that the price action is clearly depicting a
bubble and not a sausage, then the close of the first disconnected
candle (candle A) is often the best exit.
Lets now look at the slopemeter in action...........
Here is the slopemeter on the same chart >>>
The slopemeter line is in blue and there is a green horizontal line

at 3 pips difference between the BB at candle intervals.
The line is very jagged and is meant to be that way.

Under no circumstances do we smooth it for convenience - it
would then lag and will be effectively useless.
If we look at where the blue line crosses this green line, we see
the entry signal at candle S. It is 2 candles earlier than the entry
signal given by the 7 entry rules in the DNA shortcut method.
But our entry is still at candle E because here the price action
drops down thro the 1.5 BB as you can see.
The exits A (simple exit method) and B (PSAR/mid BB) are

shown. But now we also have a new exit lining up with the
slopemeter dropping back thro the green 3 pips line. This exit is
candle C.
Now candle A is the best exit, followed by..............candle C!! -

not candle B as expected!!
The slopemeter can also give exit signals as well as safer entry signals.

We now look at a case where the slopemeter saves us a lot of heartaches!! >>>
Here we appear to have a good BB walk trade.
The BB expand after the blue line, giving the signal to enter short.
There is heaps of good potential for a short entry as shown by E,
the entry point when the price action passes thro the 1.5 BB. A 2nd
contract entered here would improve on this entry.
And so the trade moves on into profit.
I have not loaded the PSAR for clarity.
Now where is this trade going? We need an exit point.
Lets look at the next post.
Oh - horror of horrors!! >>>
What a mess!! No clarity at all.
Look at that horror candle with the price action going nearly
to the upper BB.
Just where do we put a stop loss in this mess?
This is a price action area that is a dogs breakfast and one

which we should avoid!!
So how do we avoid it?
Next post.

Here is the slopemeter in action on that trade >>>
The blue line is the slopemeter line. The black line is

the zero line - no slope here at all. The green line is the
sufficient line for entering long. The red line is the
sufficient line for entering short.
Note how the blue line has not come anywhere near the
red horizontal line. There is no sign of a crossing
whatsoever.
The slope of the mid BB is simply too shallow to

indicate a good rolling BB walk trade!! The slopemeter
tells you this!!
So we do not enter or even entertain the idea of a

trade in this area!!
I have now to discover what the pip differences are for

the mid BB in other timeframes.
This will take a bit of experimentation and graphical

work involving mathematics.
We will see how it goes.
It is impossible to tell early on in a BB walk whether you are going to have a BB sausage or bubble.
The two are quite different but the difference is simple.........
Bubble - when the price action pulls away from the BB and retraces, it continues to retrace and does not recover.
Sausage - when the price action pulls away from the BB and retraces, it does so for a while but then the price action recovers and
restarts the climb of the BB. Sometimes this new climb is a little distance away from the outer BB line.
USING THE SLOPEMETER

The default value of 1.5 for the inputs should cover all the currency pairs in the 15 min charts. I have yet to setup the default
value for other timeframes.
A chart of the values for every timeframe will be needed.
The Slopemeter basically comprises Rule 8 in addition to the 7 entry rules already given for the DNA Shortcut method. It is
meant to be used as a guide only - not a hard and fast yes/no to entries.
If the slopemeter line (in blue) approaches the green horizontal line, then it is generally safe to enter LONG. If the slopemeter line
(in blue) approaches the red horizontal line, then it is generally safe to enter SHORT. The Slopemeter helps rule out unsafe
entries.
The whole method of 8 rules is probably better named as the Ultimate BB DNA Pip grabber.
It specialises in the very best of the juicy profits to be gained on the forex market - the price action walks of the BB
bubble/sausage. The fastest profit/unit time is made here - that is your trading efficiency is at its highest in these areas. The most
profit is made in the shortest possible time.
Only news releases can do better!! There are a few more details I am looking at, then we can set this whole method in concrete
and even construct the PDF before time!!
This method must be clearly differentiated from the standard BB DNA method which uses CBL taken from extreme candles in the
BB squeeze areas.
The standard DNA method covers 4 types of price action, any of which can occur in a trade taken from an extreme candle CBL.
The OBB price action includes a BB walk of a bubble/sausage.
The DNA ultimate profit grabber is a method used to trade the BB bubbles/sausages only so as to maximize profit in a given
amount of time.
These are the two methods for which a PDF will be constructed. I have now worked out a stoploss line that gives excellent exits
on the BB bubble/sausage profit grabber method. (I am thinking of renaming this to the BB Expansion method - comments
welcome.)
The exit line operates very simply - you draw an extension line from every completed candle. Should the live price action cross
the extension line you then exit. There are 2 lines - Stoploss LONG and Stoploss SHORT. Each is a separate program and you
load the correct one on your chart according to whether you are
going long or short.
Before I give the programs I will show how it works on some

charts......
Here is the first example of how this method works. We have a

LONG example.
The signal candle = S. At this point we see the outer BB

expanding, the mid BB going up. We are ready to enter.
So we load the Stoploss LONG indicator that I am going to
publish next.
Entry candle = E. We dispense with the 1.5 BB rule and enter

at the OPEN.
If you are using more than one contract you can improve on the
entry with a better one as the price action goes inwards. As each
candle closes, a stoploss extension line is drawn as shown. The
stoploss is placed at these extension lines and hence trails the
price action. The price action does not cross the extension lines until much later.
Exit Candle = X. Here the stoploss extension line from the previous candle is crossed by the price action. That is the signal to
exit. This method then, is a very SEXy method!!
Another example - overall, this method give superior exits to

the PSAR method.
In this chart the signal candle is really too sudden - we are

looking for a nice stepwise increase to the upper BB.
Nevertheless, the method works.
Signal = S.
Entry = E.
EXit = X.
Yes, its the SEX method.

Another example - again the signal candle is really too sudden
without a stepwise increase
The same procedure as before. The top wick of the exit

candle is crossed by the stoploss extension line.
Another example
In this case, candle A is not a signal candle because the

lower BB is not showing any real signs of expansion.
Here we have the case going short >>>
Same rules as above. I could post more of these examples but

it gets laborious.
I think it is simple enough to understand!!
Now its time to post the programs for the 2 exit methods for
which the examples were given above. The method (formerly
called the BB profit grabber) is now newly named as The BB
Profit Walk Method

Pointers on Trading CBL:
1) Your want correct CBL

2) You should have entered as soon as the price action crosses the CBL. That is, trade live price action - do not
wait for a close.
3) If the mid BB was going well against you - a warning.
4) If the price action goes against you on the very first candle, then exit at the half way point of the extreme
candle.
5) It is of great assistance to get the trend direction in the higher timeframe if the mid BB is showing such a slope
against you. The higher timeframe trend would have kept you out of the trade.
6) There is absolutely no point in taking trades outside of squeeze areas. Not only are they prone to failure, but
you are missing out on vital practice in detecting squeeze area trades. Being able to detect a squeeze is a skill
that you need for this method.
7) So forget about taking every trade and concentrate on squeeze area trades from now on!!
Exitmeter
Here is the latest exit indicator - the Exitmeter. Before
I post the Exitmeter, I want to explain how the squeeze
indicator designed by Ken DoubleU works:
The program notes when the Starc bands go outside of

the Bollinger bands. The indicator blips at this point to
show that the area in yellow is a squeeze area.
A good squeeze is about 25% of the width

of the bubble/sausage at its widest point
Now for a chart of the Exitmeter at work >>>
Here is a bubble showing the exitmeter at work.

When the red line crosses zero, we exit at the
close of the earliest candle.

Here is the Exitmeter at work on a very complex
BB sausage >>>
There are 3 separate entry/exits given by the 7

rules. The exits form 2 losers and one winner.
Compare the above chart with the one below where the PSAR is used >>>
In this case, the PSAR does a far superior job,

allowing only one entry and exit with a trailing
stoploss.
The Exitmeter provides reasonable exits on

bubbles but the PSAR is superior on sausages.
For the record, here is the GFT code of the

Exitmeter. I do not really like this thing, it
does not give really high quality exits and
there is no trailling stoploss to go with it.
The principle of operation is this......
The rate of change of the upper band is

measured for the duration of the
bubble/sausage. Same for the lower band.
Then upper is subtracted from the lower, and

at some point the result of the subtraction = 0 This zero point is the exit point.

The Exitmeter code is my contribution, not that of Ken DoubleU.
************************************************** ********
indicator AAA_BB_Exitmeter ;
input deviations = 2;
draw zeroline("zeroline", solid_line, blue,2),

resfinal("Exitpoint", solid_line, red,2);
vars i(number),avg(series), line_mid(series), tmp(series), line_upper(series), line_lower(series), res1(series),
res2(series);
begin
zeroline := makeseries (front(close), back(close), 0);
line_mid := sma(close, 20);
tmp := deviations * stddev(close, 20);
line_upper := line_mid + tmp;
line_lower := line_mid - tmp;
for i := front(close) + 20 + 1 to back(close) do begin

res1[i] := line_upper[i] - line_upper[i-1];
res2[i] := line_lower[i] - line_lower[i-1];
resfinal[i] := res1[i]- res2[i];
end;
end.
************************************************** ********
END
Copy of exitmeter for MT4 : http://forums.babypips.com/attachment.php?attachmentid=13249&d=1281790251
However, I am now working on a much superior approach.
The PSAR as a rule, gives a very generous trailing stop loss - too generous. Yes, there are times, like in the above example, where
the PSAR works perfectly as a trailing stop loss. My new approach is aimed at giving a very tight stoploss and a much better exit
than the PSAR can ever give.
The best news is that I am making progress and feel confident about the success of the outcome!! Thank you for your very
kind and insightful words, Graviton. You clearly understand what is involved in this work.
I now have very good news for everyone!! I have developed two, yes two, not one, indicator that sets a very tight stoploss
without giving an exit until the price action has gone a very long way to give one of the best exits possible.
After extensive testing, I have found that the two indicators beat the PSAR hands down. The same extensive testing has shown
that the two methods, A and B, are on equal par with each other. That is, they are like two closely matched football teams.

50% of the time indicator A gets the best exit. And the other 50% of the time, indicator B gets the best exit. The differences are
small, but nevertheless one always beats the other.
In all cases, the exits are very high quality. The beauty of these indicators is that their programs are very simple, in fact
indicator B has a program of only one line!! Because of their simplicity, I am going to amalgamate them into one and use a few
"if, then" "< >" functions to allow the computer to calculate both indicators, and by comparing them, only draw the one that
gives the best exit. I hope to sort that out soon and then we can dispense with all of the other indicators. I think that readers will
be suitably pleased with the result.
YES!!
I have it!! I have successfully programmed the trailing stoploss + exit indicator!!
I will now post the code. This indicator is for the BB Profit Walk method which enters and exits on the BB bubbles and
sausages for maximum profit in minimum time. This indicator is a tight trailing stoploss that gives a very high quality exit.
It is vastly superior to the PSAR in 3 regards........

1. The trailing stop loss is so much tighter.
2. The exit point is far superor
3. There is no inversion to worry about.
The code is in the next post. I will give chart examples of how it works in the posts following.
Here is the code for the trailing stoploss +exit indicator for the BB Profit Walk method. There is both a LONG and SHORT
code. Depending on whether your BB bubble/sausage is a long or short price action, you load the appropriate version on your
chart.
The code for LONG >>>
************************************************** ********
indicator A_Stoploss_LONG ;
draw TS ("trailingstoploss", solid_line, dark_green,2);
vars tgl(series), mid(series), tr(series), atr(series),

lower(series), i(number);
begin
tgl := wma(sma(close, 8), 4);
mid := linreg(close, 20);

tr := truerange();
atr := ema(tr, 15);
lower := mid - atr;
for i := front(tgl) to back(tgl) do begin
if tgl[i] >= lower[i] then

TS[i] := tgl[i]
else
TS[i] := lower[i];
end;
end.
************************************************** ********
The code for SHORT >>>
************************************************** ********
indicator A_Stoploss_short ;
draw TS ("trailingstoploss", solid_line, red,2);
vars tgl(series), mid(series), tr(series), atr(series),

upper(series), i(number);
begin
tgl := wma(sma(close, 8), 4);
mid := linreg(close, 20);

tr := truerange();
atr := ema(tr, 15);
upper := mid + atr;
for i := front(tgl) to back(tgl) do begin
if tgl[i] <= upper[i] then

TS[i] := tgl[i]
else
TS[i] := upper[i];
end;
end.
************************************************** ********
BB Profit Walk Indicator Requirements

At the end of all this, the BB Profit Walk method needs only 3 indicators to make it work >>>
1. The Bollinger Bands to allow you to see the bubbles/sausages.
2. The trailing stoploss + exit indicator just posted.
3. An temporary indicator to tell you if the bubble/sausage is safe to enter.
This 3rd indicator is one I have yet to construct and it should not be nearly as difficult as what I have just done. This 3rd indicator
simple measures the squeeze and tells you if it is <= 25% of the section in front of it. If the squeeze is not equal to 25% or less
than the previous expanded area, then it is unlikely that the next expansion will yield a successful trade.
So therefore, this 3rd indicator in necessary. However, once you haved used this indicator to determine the safety of entry, then
this indicator can be deleted from the chart as it will have no futher use in the trade.
I shall now post chart examples of the exit indicator to show how it works. Then I have to construct the 3rd indicator and, to
finish off, put all the latest entry rules together. Once that is done, the final PDF of this method can be designed and posted.

Here is a LONG example >>> Compare with the PSAR >>>
S = signal candle.
E = entry candle.
X = exit candle. As you can see, the exit of the PSAR is much lower, exiting at
about the mid BB band.
The trailing stoploss is given in green in a LONG trade. The stoploss with the PSAR is also much more generous - too
The trailing stoploss is given in red in a SHORT trade. generous.
From each candle point on the stoploss, an extension line is

drawn. If the live price action in the next candle crosses this
line, you exit.
The final exit is shown with the blue extension line.

Another LONG example >>>
In this chart, I have also loaded the PSAR for comparison.
The PSAR in very inferior in both the size of the stoploss and
the exit point.A
Short example. The stoploss has been calibrated so that it can Comparison with the PSAR >>> Need I say more!!?
come very close indeed to the price action but not allowing the
extension lines to cross a candle prematurely. A very inferior exit and stoploss!!
In this case, the stoploss line is very close to the price action but
the exit is still of very high quality.

Another short trade, Same parameters as before. And yet another short trade >>> The area marked AA will be
magnified next post.
A magnified view of AA >>> Have a look at this!! >>>

The stoploss is finely calibrated and sometimes there is a near You would think that candle R is such a strong retracement that
miss for the extension. However, a near miss means that an it would bring the death of your trade. However, not so!!
extension further down the line gives a better profit.
The stoploss goes around the low of the candle, so that any
extension lines do not cross future candles. And look at the exit
- very high up indeed!!

Will the new indicator replace the PSAR? The PSAR was meant for the DNA method proper.
For the DNA method, you should stick with the PSAR for the first few candles after the extreme until both indicators start to line
up with each other. If they do that, then you can switch over to the trailing stoploss + exit indicator.
Sage Advice
TQ: After the past three weeks, I'm beginning to come to the conclusion that breakouts of bollinger band squeezes are not very
reliable on the 15m TF…The first type of breakout is the Big Spear, wherein price moves suddenly many pips in a single
candle…The second type of breakout is where we get both our signal and entry candles but the bolls really never continue to
expand…
I am going to answer your post in detail because it is important. I am well ahead of you and 100% familiar with what you are
saying - therefore, I take the following approach......
When new traders come on this forum with a view to trading forex, they come here expecting to make millions. They look to get
rich quick, thinking that a small outlay and high leverage can net them a progressive income. They expect this with little learning,
thinking that it is easy.
Then after some work, they start calculating, even drawing graphs to show how much compounding will give them a million
dollars in such and such a time. Certain outlays are given, such as 2% or some other growth figure. Then the amount and
frequency of trading is added into the equation.
Newly aspiring traders end up licking their lips as they see what appear to be extremely promising figures. Why work? they think,
when they can trade and compound their profits into millionare road.
The truth is, of course, that the financial pie is limited, and forex trading can be likened to a whole flock of seagulls fighting over
left over fish + chips on the beach. The biggest, strongest and most aggressive seagull gets the chips. Now the get rich quick
mindset of the new trader affects them subconsiously. That is, they don't realise that it drives them to wrong actions.
The new trader, looking for large profits, goes straight to where the action is. And where is this action? Where will we see
candles growing large in both green and red in very short time? Where do we see apparent profits roaring? In the 1 minute
chart, of course!!
Here the candles move fast, and hence give the illusion of profits. After all, the new trader is looking for action!! The
experienced trader knows better and is looking for patience!! Where is the difference?
Anyone who has traded on a forex chart knows full well that the price oscillates up and down. Yes, it has a trend to it but the
price action goes up, down, up, down, up, down on its way along the trend, be it an up or down trend.
This oscillation can be clearly seen on the smallest time frame - the tick chart. These oscillations can be 10 pips or more at times.
Now in a 15 min timeframe, these oscillations are very important. They make up a huge factor of the size of the actual candle.
Get in at.........
• the right time of the oscillation - and you make a profit.

• about halfway thro the oscillation - and you might get something, maybe just break even.
• at the wrong end of the oscillation - you make a loss.
It becomes extremely important whether you get in at say 90 rather than 100. The 10 pip range is crucial. Furthermore, these
large oscillations threaten your stoploss with every 15 minute candle. The oscillations have only to hit your stoploss once and you
are dead. The interbanks know this and send price spikes to hunt out your stops. So one bigger than usual oscillation (a price
spike) and there goes your stoploss.

Now in a daily candle, the oscillations, compared to the range of the candle, are so small and far away from the stoploss, that you
need a telescope or binoculars to see the oscillations. With a daily candle, as long as you know the trend direction, it does not
matter if you get in at 90 or 100. Why is this so?
Because, compared with the total pip range of the daily candle, a 10 pip oscillation is nothing. Further, you stoploss is far away
and will never be hit with a price spike. The daily candle is 24 hours of price action. In 15 minute version, it contains 4 BB
bubbles + 3 sausages + 10 sqeezes + several bits of random action. Then you make a profit.
The essence here it time. With a daily chart, all you need to know is the trend direction. Then, if you enter at random in the
correct direction, you will make a profit at the end of the day. Try that in a 15 minute chart!! Trading one bubble while the
oscillations are so large is not the way to a profit.
The difference is that you are in a daily for at least 24 hours. In a 15 min, you may be in for maybe 2 hours. In the daily chart you
are in the trade much longer.
It is time that makes the profit, not the action in the chart.
If time in the market (knowing the correct trend direction) is important, we can see the problem with trading just one BB bubble in
the 15 min chart. There is not enough time to let the profit potential grow, and the oscillation factor becomes a huge player in the
timeframe and the price action. By comparison, the oscillation factor in the daily candle is so small as to be of little consequence.
So the profit potential is greatest in the daily candle.

The difference between the two is the time in the market.
And the daily chart shows very little action compared to the 1 minute chart.
Now we see why the new traders, with a quick profit, no patience mindset, choose the wrong timeframes. (speaking generally -
not referring to Merchantprince).
New traders choose the short, action timeframe with its least profit potential, instead of the long, patience timeframe with
its almost guaranteed profits. When we understand the above, we are ready to make a breakthro in our trading - and real
profits are potentially on our doorstep.
It appears, Merchantprince, that you are ready to take this step to higher timeframes (not that you were ever greedy or lacked
patience - I am speaking generally!!)
Quote “I am strongly considering leaving the 15m TF behind altogether, even though I am only trading squeeze breakouts and
CBL entries off level bolls.”
This is good news!! If I remember correctly, you started out with the 2 minute timeframe, and graduated to the 15 minute
timeframe. Why not now go the whole way and forget about the 1 hour timeframe, and consider only the 4 hour, 8 hour and daily
timeframes. This I say to other readers also.
One of the greatest psychological enemies of the new trader is pride or stubborness. Every psychological breakthro to an
improvement in trading requires a confession that the trader's is present trading approach is wrong, and consequently, making a
loss. This confession is followed by a repentence - a change of heart causing the trader to adopt the new way of trading that leads
to a profit.
This change of heart is blocked when a trader has a pride or stubborn mindset - thinking that what they know is correct, and hence
persisting in the destructive trading style. The end thereof is a loss of all funds, and this is the only way the stubborn trader is
brought to heel.
To all, I say this........

• Do not be a stubborn trader with pride uppermost.
• Be humble, and prepared to repent of a wrong trading action long before it destroys your account.

o990l6mh- Recently there's been a discussion here about the benefits of trading the higher time frames. Tymen PM'd me and
asked if I would give a brief recollection on how it came to be that I ended up on the higher time frames. In order to explain that, I
have to start at the beginning.
In 2008 when I was completely new to all this I had the very good luck of finding Tymen's first big thread. Before that I had
wandered the usual newbie jungle path in darkness. That's another story though. I was, and still am to some extent, fond of
candlesticks. I learned a lot from Tymen and from some books that I read. After a while I started feeling that I knew enough to
have a go a it. This was when a completely unexpected problem appeared: how was I supposed to have the time needed for
trading? I worked, as I still do, a full time day job, one which doesn't allow me to check the charts at any time I wish.
Hmm, how to solve this problem? I knew that the ideal was to trade higher time frames since their signals are more reliable, this I
had read and knew to be true. But suddenly my job became an obstacle I couldn't pass. I couldn't trade while at work, period.
Since I work during London and early NY this was a big problem.
I had two choices really, and as time and money would show me, I started off making the wrong, impatient choice - I decided to
trade for a few hours in the evening after work. Obviously this meant that I had to trade shorter time frames and I ended up on the
5min or even 1min since even the 15min yielded little or nothing for an impatient guy staring at the screen for 3-4 hours while NY
was slowing down.
I tried to scalp and failed in a spectacular way. I started jumping systems and looking for the holy 1-5min grail etc. Needless to
say I failed and failed again. I came to a point where I realized that I could either go on like this and join the 95% club that I
already seemed to have a pending membership application for, or I could face the hard truth and make some real changes. Luckily
I did the latter and the first thing I understood was this: you have to find a way to make trading fit into your life.
When I understood that, I had no choice but to accept that all I could trade was daily bars. There simply was no time in my life to
trade intraday. In order to trade properly I would have to be patient and wait for days or even weeks for a good setup. As time
went by and I learned more about trading, not to mention patience, I increasingly understood that it was a very good choice to
move to a higher time frame.
Some of the pros of trading higher time frames, such as 4H and above, are:
• More time to make a decision before placing an order.
• No risk of "I'm bored" trades - these are more common than you'll think. After a couple of fruitless hours in front of
the charts the boredom easily becomes great enough so that a trade is made that never should have been. This of
course stops out for a loss every time and then the green devil of revenge-trading may appear to add insult to injury.
• No need to stare at the screen for hours on end, it's enough to check the charts once a bar closes.
• More reliable price action signals.
I've been there, so I know what eagerness, impatience etc will do to you. I wanted to trade so badly that I tried to force trades that
weren't there on a 1min chart during the slowest part of the 24H day. It didn't work, but it taught me a lot, not least about myself.
Nowadays I will not trade on shorter time frames than 4H. Maybe that will change in the future but for now that is what suits me.
My advice is to build patience and character and start out on a time frame where you're giving yourself a real chance to succeed.
Great post o990l6mh. I'm sure it will be helpful to many here. I've tried to demonstrate methods that work well on longer
timeframes in live trading exercises using shorter timeframes. The reason is I wanted to show something in a few hours that would
take days or weeks to demonstrate on the proper longer time frames, and I was depending on the fractal nature of the markets
timeframes to demonstrate the point in a scaled down fashion on a shorter time frame. Unfortunately, the markets are not
completely fractal in that small random spikes and moves around 1 X ATR to 2 X ATR occur more randomly on lower
timeframes.
These small unpredictable moves that are often caused by minor news events and large trades being executed, sometimes very
ham-handedly, greatly increase the randomness of shorter timeframes as compared to longer timeframes. It seems that moves of
15 to 30 pips on the short timeframes that wouldn't even matter on longer timeframes, combined with the higher transaction cost
of the faster trades, inevitably overcome even the best laid plans and make trading the shorter timeframes more like gambling than
investing.
So in the end, even using the shorter timeframes to test, practice or demonstrate a method designed for longer timeframes is
misleading. This trading stuff can be really hard, and tying to demonstrate a longer TF concept real time on shorter timeframes is
nearly impossible. Since it takes months to years of trading to generate significant long TF trading results, it's only through others
experience like yours that most new traders will migrate their trading to longer TF's without wasting precious capital and lifespan
trying to out-scalp the scalpers on the shorter time frames.
Thanks for sharing your experience. It is truly appreciated and I'm sure a wake-up call to many
As I have said before, and say again - a 1hour/4hour/8 hour/ daily timeframe is recommended for beginners here. Assuming you
have the trend direction correct, the oscillations are small compared to the candle, and time in the market will get you the pips.
The more time, the more pips.
It is only when you are experienced that you can go to lower timeframes where the oscillations make up a large part of the candle.
The experienced trader knows how to deal with these oscillations and get the best out of them. As a result, the experienced trader
can shorten his time in the market - that is, use a shorter timeframe.
TA Question: I am seeing a strong link between the steepness of the mid bb slope and the success of bb profit grabber trades...
am i right? or is that a massive over simplification?
TA Answer: This is correct and is a must know!! That is why I coded the Slopemeter for the mid BB to check for safe entries.
When the mid BB is very steep the price action will walk the outer bands. This is the basis for my BB Profit Walk method. But I
strongly recommend that you do NOT trade this method just now because it is still under development. Embarking on
this method could bring you massive losses.
Stick with the DNA method and enter at a squeeze. Use minimum 30min/1hour timeframe. Use the PSAR as your stoploss and
stick with the rules that I have posted re use of the PSAR. Then you are in safe territory. There is a lot to learn in this thread -
both in theory and practice.
I am field-testing the new BB Profit Walk indicator on the current EU downtrend. But I am a bit confused over how the indicator
line is being drawn. Should we be taking our stop-loss value from the previous candle?
Since there is obvious confusion here, let me leave

you all in no doubt about how this indicator works.
Firstly.........
It looks like the indi paints down near the current price
of the current candle underway. It certainly does
repaint and that is why I designed a special method to
use it.
An extension line is drawn to the right from each

stoploss point on the indicator. The extension line is
drawn from the centre line of each candle. Sample
extension lines are shown in blue on your chart.
The extension line of candle A now hovers over candle

B. The stoploss distance is the green line distance from the high of candle B to the blue stoploss extension line.
The extension line of candle C now extends to candle D. However, the wick of candle D (price action) has crossed the blue
extension line and, therefore, the trade is closed when the price action crosses this line.

Candles E and F operate the same way but the trade is now closed. The blue extension line from candle E hovers over candle F.
The stoploss distance is the green line distance from the high of candle F to the blue stoploss extension line.
I hope this clears up the confusion.
Have a look at the last candle on the chart.
Going down nicely isn't it?

Nice trade!!
Lots of pips!!
OK, now look at the same chart a little while later >>>
Hey!!
What have you done?!! Let all those pips go in a retracement!!
Given back 80% of your profit? That's terrible!!
When you get a good spike way past the BB, it is best to exit at the best
possible moment as in the top chart.
There will always be a major retracement in such cases.
So exit well before signs of retracement, then let the candle retrace
back and you can then re-enter.
It takes a very long time in a short trade for the standard price action
to come again to such a low point as the spike!!
Dear People,
I have posted very little lately and not really posted replies to anyone in particular, even though it may be helpful.
There are two reasons for this......
1) I am busy trading myself since my funds are slowly being depleted due to concentrating on research and posting.
2) I am carefully researching the Profit Walk (profit grabber) method.
I can safely say at this point that entering and running with the profit walk is extremely difficult, as Merchantprince has posted.
The initial signal candle is mostly a very long candle with the remainder setting you up for a trading loss. This means that the real
profit walk is contained in that very long candle - and this translates to a lower timeframe where this long candle is spread out into
several candles, the first of which is your signal candle.
Now which timeframe are we to choose then?

The 15 min?
The 5 min?
Or maybe the 1 min?
The lower timeframes show a lead up or pre-expansion before the major expansion. This pre-expansion is filled with retraces and
it quite useless for trading. This, of course, brings the question - how can we know if the pre-expansion is not the real expansion?
So you can see how difficult the work is.
For the BB DNA method - the PSAR with the rules on post #3973/3974, page 398.
For the BB Profit Walk (profit Grabber) method (still under development) - the stoploss + exit method which was converted to
MT4 code by IronHeart a few pages back.
Do not try to modify these methods or invent exit strategies on your own - it requires an enormous amount of correlation
and testing work in many different timeframes (and mathematical experience to boot.) Changing the parameters will most
likely cause you to start having losses.
I can report that at this time, as well as starting the BB DNA PDF, I am making great progress at designing the Profit Walk
method.
I have had another great revelation - just as great as the one that inspired the BB DNA method!!
It involves a lot of programming study by me - which will result in all the indicators posted so far becoming redundant, that is, we
will not need them. Instead, we are heading towards naked charts again!! And.........wow!!.............an even higher win/loss ratio
than the DNA method!!
I envisage the Profit Walk method as follows.........

• A generally naked chart.
• A couple of signals to enter.
• A trailing stoploss + exit indicator.
• An extremely high win/loss ratio - much higher than BB DNA.
• The Bollinger bands will disappear from the chart.
However, given the constraints of time, this work will probably not be revealed until February, next year, when I return from
holidays commencing 15 November. Sorry about that!! My work at the moment is cut out with the present PDF. In the
meantime I will continue to polish up the Profit Walk method so that it is completely ready to go when revealed.
Cut off Post #4671

Notes:

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A STRATEGY BY TYMEN

Trading Without Indicators

Trading Without Indicators Page | 3

My first example will be a simple daily chart

How do we draw these [support and

It is best if the price action just touches your line but

DAILY chart of the Cable

I have improved the layout!!

Trading Without Indicators Page | 4

The same code again - numbers

We need to cut thro the wicks at

1 hour chart of USD/JPY

Here I have really knocked

20 minute chart of the Swissy

4 SR lines appear here - colour

Well, we will be using only 2 of

Trading Without Indicators Page | 5

Let us magnify this chart

The price action came from the

It is just a marker for us at this

Drawing of price action

Trading Without Indicators Page | 6

Now look at the next diagram

So what is the solution....?

Naked Trading Method.

LONG ENTRY RULE

It is lower than the last so we do the following same procedure as before......top,

We now continue by waiting for the next candle.

Again it is lower to we again set up the count back line.

top, left, top, left, top - extend right.

We end up with the same entry line as before. With a

Trading Without Indicators Page | 8

The entry is in a new position.

By lower, I mean the low of the candle. This is the point in

Important CBL Points.....

Trading Without Indicators Page | 9

Here candles 1, 2, 3, 4 have their lows not going as low as candle L.

The Next chart shows some action>>>

Here the price action is starting to reverse to becoming an uptrend.

Are we really going to make a profit?

Well, here we have our answer

The LONG ENTRY CBL is shown and the

It is easily figured - it is at the point of the

The above candles were taken from a 4 hour

Trading Without Indicators Page | 10

From there we draw the CBL.

It goes........... bottom, left, bottom, left, bottom.

As before, we then extend the line to become our SHORT ENTRY

Look at Error! Reference source not found., the same procedure as

Now to look at the whole picture >>>

The stop loss is placed at the highest point. The

Trading Without Indicators Page | 11

The SR lines from a daily chart

Now - to apply it more to Tymen's method:

Outline so far of the naked trading method

Here is a diagram showing the steps outlined Practice the

I now here show what is optically, a more pleasing way for

Trading Without Indicators Page | 13

TQ- …. I think it will be interesting to share our ideas about this

Let me post an example myself >>>

Trading Without Indicators Page | 14

I have chosen 4 trade areas, 3 long, 1 short.